TY  - JOUR
AU  - Stiglitz,Joseph E.
TI  - The General Theory of Tax Avoidance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1868
PY  - 1988
Y2  - February 1988
UR  - http://www.nber.org/papers/w1868
L1  - http://www.nber.org/papers/w1868.pdf
N1  - Author contact info:
Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 814
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu
AB  - This paper outlines a general set of principles for tax avoidance. Most of at least the common tax avoidance schemes can be reinterpreted as making use of one or more of these principles. Four such methods are described. In a perfect capital market, these methods would enable the astute taxpayer to eliminate all taxation on capital income. The fact that the tax system raises revenue is attributed to lack of astuteness of the taxpayer and/or lack of perfection of the capital market. Accordingly, models which attempt to analyze the effects of taxation assuming rational, maximizing taxpayers working within a perfect capital market may give misleading results.A full analysis of tax avoidance cannot be conducted within a partial equilibrium model; transactions which reduce one individual's tax liability may at the same time increase another's.We delineate tax avoidance schemes which reduce the aggregate tax liabilities of the participants. Much of the"general equilibrium" gain from tax avoidance arises from differences in tax rates, both across individuals and across classes of income. Our analysis is shown to have implications both for patterns of ownership of assets and the timing of transfers.
ER  -