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Bypassing progressive taxation: fraud and base erosion in the Spanish income tax (1970-2001)

Torregrosa Hetland, Sara LU (2015) In IEB Working Paper
Abstract
In this paper I estimate under-assessment of incomes in the Personal Income
Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise, which follows and slightly modifies the Feldman and Slemrod (2007) procedure, based on the relation of reported charitable donations with the composition of income in tax micro-data.
Both calculations show that concealment of income differed substantially across sources and levels, with better compliance at the bottom of the distribution of taxpayers. Because of this, fraud made the tax less progressive than it was on paper. Compliance improved over the next decades, but the overall levels were... (More)
In this paper I estimate under-assessment of incomes in the Personal Income
Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise, which follows and slightly modifies the Feldman and Slemrod (2007) procedure, based on the relation of reported charitable donations with the composition of income in tax micro-data.
Both calculations show that concealment of income differed substantially across sources and levels, with better compliance at the bottom of the distribution of taxpayers. Because of this, fraud made the tax less progressive than it was on paper. Compliance improved over the next decades, but the overall levels were still far from those attained in developed countries, because of lack of administrative capacity or political will to enforce the new regulation. In this way,
general, comprehensive income taxation was hardly a reality 20 years after its introduction. (Less)
Please use this url to cite or link to this publication:
author
publishing date
type
Working Paper
publication status
published
subject
keywords
Tax evasion, base erosion, under-reporting, progressivity, personal income tax
in
IEB Working Paper
issue
2015/31
publisher
Institut d’Economia de Barcelona
language
English
LU publication?
no
id
919f7629-0f4e-49a8-804f-a26d0e27e19f
alternative location
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2688624
date added to LUP
2016-05-26 18:17:56
date last changed
2016-10-20 14:43:45
@misc{919f7629-0f4e-49a8-804f-a26d0e27e19f,
  abstract     = {In this paper I estimate under-assessment of incomes in the Personal Income<br/>Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise, which follows and slightly modifies the Feldman and Slemrod (2007) procedure, based on the relation of reported charitable donations with the composition of income in tax micro-data.<br/>Both calculations show that concealment of income differed substantially across sources and levels, with better compliance at the bottom of the distribution of taxpayers. Because of this, fraud made the tax less progressive than it was on paper. Compliance improved over the next decades, but the overall levels were still far from those attained in developed countries, because of lack of administrative capacity or political will to enforce the new regulation. In this way,<br/>general, comprehensive income taxation was hardly a reality 20 years after its introduction.},
  author       = {Torregrosa Hetland, Sara},
  keyword      = {Tax evasion,base erosion,under-reporting,progressivity,personal income tax},
  language     = {eng},
  number       = {2015/31 },
  publisher    = {ARRAY(0x9f50e58)},
  series       = { IEB Working Paper },
  title        = {Bypassing progressive taxation: fraud and base erosion in the Spanish income tax (1970-2001)},
  year         = {2015},
}