DP12781 Tax Evasion and Inequality

Author(s): Annette Alstadsaeter, Niels Johannesen, Gabriel Zucman
Publication Date: March 2018
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Programme Areas: Public Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12781

This paper estimates the size and distribution of tax evasion. We combine random audits, tax amnesties, and leaks from offshore financial institutions matched to wealth records in Scandinavia. Tax evasion rises sharply with wealth: 3% of personal taxes are evaded on average, versus 25%–30% in the top 0.01% of the wealth distribution. A model of the supply of evasion services can explain this gradient. Taking tax evasion into account increases inequality substantially. After using tax amnesties, evaders do not seem to increase legal tax avoidance, suggesting that fighting evasion can allow governments to collect more taxes from the wealthy.