TY  - JOUR
AU  - Gordon,Roger H.
AU  - Nielsen,Soren Bo
TI  - Tax Avoidance and Value-Added vs. Income Taxation in an Open Economy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5527
PY  - 1996
Y2  - April 1996
UR  - http://www.nber.org/papers/w5527
L1  - http://www.nber.org/papers/w5527.pdf
N1  - Author contact info:
Roger H. Gordon
Department of Economics 0508
University of California, San Diego
9500 Gilman Drive, Dept. 0508
La Jolla, CA 92093
Tel: 858/534-4828
Fax: 858/534-7040
E-Mail: rogordon@ucsd.edu

Soren Bo Nielsen
Copenhagen Business School
E-Mail: sbn.eco@cbs.dk
AB  - 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.
ER  -