Why do Individuals Evade Payroll and Income Taxation in Estonia?

U of Tartu Economics and Business Administration Working Paper No. 49-2007

40 Pages Posted: 9 Mar 2007

See all articles by Kenneth A. Kriz

Kenneth A. Kriz

University of Nebraska at Omaha - School of Public Administration

Jaanika Meriküll

University of Tartu - Faculty of Economics and Business Administration

Alari Paulus

University of Essex - Institute for Social and Economic Research (ISER)

Karsten Staehr

Tallinn University of Technology (TUT) - Department of Finance and Economics; Bank of Estonia

Date Written: February 7, 2007

Abstract

This paper employs micro-level data to determine the factors characterizing individuals who evade payroll and income taxation in Estonia. Using logit estimation on three different cross-sectional datasets, we estimate the marginal effects of different individual characteristics on tax evasion. The three datasets give broadly analogous results. Payroll and income tax evasion is most prevalent in small firms and in the construction and agricultural sectors. Evasion is more common among individuals who work part-time, are of non-Estonian ethnicity, have relatively short education, earn a low income and are men. Tax evasion is more frequent among the young and the elderly than among the middle-aged. There are clear regional differences. The overall picture is that the relatively disenfranchised are most likely to evade payroll and income taxation in Estonia.

Keywords: tax evasion, unreported work, incentives, tax system

JEL Classification: H26, H24, D19

Suggested Citation

Kriz, Kenneth A. and Meriküll, Jaanika and Paulus, Alari and Staehr, Karsten, Why do Individuals Evade Payroll and Income Taxation in Estonia? (February 7, 2007). U of Tartu Economics and Business Administration Working Paper No. 49-2007, Available at SSRN: https://ssrn.com/abstract=968829 or http://dx.doi.org/10.2139/ssrn.968829

Kenneth A. Kriz

University of Nebraska at Omaha - School of Public Administration ( email )

Annex 27
6001 Dodge Street
Omaha, NE
United States
402-554-2058 (Phone)
402-554-2682 (Fax)

Jaanika Meriküll

University of Tartu - Faculty of Economics and Business Administration ( email )

Narva Rd. 4-A214
Tartu 51009, 51009
Estonia

Alari Paulus

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Karsten Staehr (Contact Author)

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3-486
Tallinn, 12618
Estonia

HOME PAGE: http://www.ttu.ee/karsten-staehr

Bank of Estonia ( email )

Estonia Building 13
Tallinn, 15095
Estonia

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