Cover IMF Working Papers
Buy Book in Print
Tax Rate Cuts and Tax Compliance—The Laffer Curve Revisited
Author:
Tamás K. Papp null

Search for other papers by Tamás K. Papp in
Current site
Google Scholar Close
and
Elöd Takáts
Search for other papers by Elöd Takáts in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 007
Language:
English
Publication Date:
01 Jan 2008
DOI:
https://doi.org/10.5089/9781451868692.001
ISBN:
9781451868692
ISSN:
1018-5941
Pages:
20
Keywords:
WP; Laffer curve
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (250.4 KB) Download Epub
The paper shows how tax rate cuts can increase revenues by improving tax compliance. The intuition is that tax evasion has externalities: tax evaders protect each other, because they tie down limited enforcement capacity. Thus, relatively small tax rate cuts, which decrease incentives to evade taxes, can lead to increased revenues through spillovers - creating Laffer effects. Interestingly, tax rate cuts here imply increasing effective taxes. The model is consistent with what happened in Russia, and may provide basis for further thinking about tax rate cuts in other countries.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund