Description |
1 online resource (26 pages) |
Series |
IMF working paper, 2227-8885 ; WP/03/23 |
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IMF working paper ; WP/03/23.
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Summary |
This paper develops a dynamic computable general equilibrium model in which optimizing agents evade taxes by operating in the underground economy. The cost to firms of evading taxes is that they find themselves subject to credit rationing from banks. Our model simulations show that in the absence of budgetary flexibility to adjust expenditures, raising tax rates too high drives firms into the underground economy, thereby reducing the tax base. Aggregate investment in the economy is lowered because of credit rationing. Taxes that are too low eliminate the underground economy, but result in unsustainable budget and trade deficits. Thus, the optimal rate of taxation, from a macroeconomic point of view, may lead to some underground activity |
Bibliography |
Includes bibliographical references (pages 25-26) |
Notes |
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL |
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English |
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digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL |
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Print version record |
Subject |
IMF Institute.
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SUBJECT |
IMF Institute fast |
Subject |
Informal sector (Economics) -- Effect of taxation on -- Econometric models
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Fiscal policy -- Econometric models
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Credit control -- Econometric models
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Feltenstein, Andrew
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Informal sector (Economics) -- Econometric models
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Informal sector (Economics) -- Econometric models
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Credit control -- Econometric models
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Fiscal policy -- Econometric models
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Form |
Electronic book
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Author |
International Monetary Fund.
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ISBN |
145189192X |
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9781451891928 |
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1281604917 |
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9781281604910 |
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9781451844061 |
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1451844069 |
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1462359159 |
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9781462359158 |
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1452722048 |
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9781452722047 |
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9786613785602 |
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6613785601 |
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