NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tax Avoidance and Value-Added vs. Income Taxation in an Open Economy

Roger H. Gordon, Soren Bo Nielsen

NBER Working Paper No. 5527
Issued in April 1996
NBER Program(s):   PE

Ignoring tax avoidance possibilities, a value-added tax and a cash-flow income tax have identical behavioral and distributional consequences. Yet the available means of tax avoidance under each are very different. Under a VAT, avoidance occurs through cross-border shopping, whereas under an income tax it occurs through shifting taxable income abroad. Given avoidance, we show that a country would make use of both taxes in order to minimize the efficiency costs of avoidance activity, relying relatively more on that tax that is harder to avoid. We then make use of aggregate Danish tax and accounting data from 1992 to measure the amount of avoidance that occurred under the two taxes. While the estimates of avoidance activity are small, the figures imply that Denmark could reduce the real costs of avoidance activity by putting more weight on income rather than value- added taxes.

download in pdf format
   (1350 K)

email paper

This paper is available as PDF (1350 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5527

Published: Gordon, Roger H. and Soren Bo Nielsen. "Tax Evasion In An Open Economy: Value-Added Vs. Income Taxation," Journal of Public Economics, 1997, v66(2,Nov), 173-197.

Users who downloaded this paper also downloaded these:
Aizenman and Jinjarak w11539 The Collection Efficiency of the Value Added Tax: Theory and International Evidence
Stiglitz w1868 The General Theory of Tax Avoidance
Slemrod and Yitzhaki w7473 Tax Avoidance, Evasion, and Administration
Caspersen and Metcalf w4387 Is A Value Added Tax Progressive? Annual Versus Lifetime Incidence Measures
Feldstein w5055 Tax Avoidance and the Deadweight Loss of the Income Tax
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us