Judith Panadés

Tax evasion and Ricardian equivalence

Abstract This paper studies whether the Ricardian equivalence holds in a context with tax evasion. In such a context, the degree of uncertainty becomes endogenous since agents control the distribution of their future income through their income report. We find that Ricardian equivalence holds when proportional fines are imposed on evaded taxes, but does not hold when the fines are on the amount of unreported income. We also show that it is possible to explain the empirical negative relation between tax rates and declared income when the path of government spending remains unchanged.

Does Tax Evasion Modify the Redistributive Effect of Tax Progressivity

This article shows how tax evasion modifies the redistributive effect of tax progressivity. The analysis, which is conducted by means of the standard tax evasion model, suggests a possible reduction of the redistributive effect of progressive income taxation. This issue is important to empirically evaluate and compare the redistributive effect of tax systems in economies with different tax evasion levels.