Sara Torregrosa Hetland
Senior lecturer
Bypassing progressive taxation: fraud and base erosion in the Spanish income tax (1970-2001)
Author
Summary, in English
In this paper I estimate under-assessment of incomes in the Personal Income
Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise, which follows and slightly modifies the Feldman and Slemrod (2007) procedure, based on the relation of reported charitable donations with the composition of income in tax micro-data.
Both calculations show that concealment of income differed substantially across sources and levels, with better compliance at the bottom of the distribution of taxpayers. Because of this, fraud made the tax less progressive than it was on paper. Compliance improved over the next decades, but the overall levels were still far from those attained in developed countries, because of lack of administrative capacity or political will to enforce the new regulation. In this way,
general, comprehensive income taxation was hardly a reality 20 years after its introduction.
Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise, which follows and slightly modifies the Feldman and Slemrod (2007) procedure, based on the relation of reported charitable donations with the composition of income in tax micro-data.
Both calculations show that concealment of income differed substantially across sources and levels, with better compliance at the bottom of the distribution of taxpayers. Because of this, fraud made the tax less progressive than it was on paper. Compliance improved over the next decades, but the overall levels were still far from those attained in developed countries, because of lack of administrative capacity or political will to enforce the new regulation. In this way,
general, comprehensive income taxation was hardly a reality 20 years after its introduction.
Publishing year
2015
Language
English
Publication/Series
IEB Working Paper
Issue
2015/31
Links
Document type
Working paper
Publisher
Institut d’Economia de Barcelona
Topic
- Economic History
- Economics
Keywords
- Tax evasion
- base erosion
- under-reporting
- progressivity
- personal income tax
Status
Published