Does Commodity Tax Evasion Reduce Welfare and Can Enforcement Improve It?
Author InfoMary E. Lovely Abstract This paper compares discrete equilibria in which consumers do and do not evade commodity taxes by making cross-border purchases. When the government faces a revenue requirement, the comparison shows that border crossing reduces welfare if resources wasted by evasion exceed the benefit of consumption changes, where these changes reflect lower prices across the border and induced changes in domestic tax rates. Enforcement reduces welfare if administrative and uncertainty costs outweigh the benefits of consumption changes and the reduction in resource costs. The analysis shows that the welfare effect of evasion depends on how well designed the tax system is and how effective enforcement resources are in deterring border crossing. Download InfoTo download: If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further probl
