Rewarding the Consumer for Curbing the Evasion of Commodity Taxes?
21 Pages Posted: 21 Nov 2006
Date Written: November 20, 2006
Abstract
Monetary or in-kind transfers can be used as an incentive for consumers to request official receipts for goods they purchase. A novel system of in-kind transfers in the form of lottery tickets has recently been introduced in China. Price subsidies (often granted through tax deductions or refunds) are also widely used. This paper extends the standard model of commodity tax evasion for firms (in a competitive market and under the conjectural variation approach) in order to describe the effects of subsidies on tax evasion and in terms of incidence and of government revenue. The role of search costs and of enforcement costs is also taken into account.
Keywords: tax evasion, commodity taxes, subsidies
JEL Classification: H31, H32, K42
Suggested Citation: Suggested Citation
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