Abstract
Most empirical studies of income distribution use official tax data based on reported income. In the presence of tax evasion, or a large “irregular” economy, such data give an incorrect picture of the actual income distribution. In this paper, a model of tax evasion, originally due to Allingham and Sandmo (1972), is developed to analyze the relation between the actual and the officially reported income distribution. It is shown that within the framework of this model, the distribution of total income (which also takes income from the hidden sector into account) is generally more uneven than the distribution of officially reported disposable income. It is also concluded that in the presence of tax evasion, government policy aimed at reducing the degree of inequality can sometimes be counterproductive. Policy measures which seem egalitarian in the sense that they make the distribution of officially reported disposable income more even, might very well make total income less evenly distributed.
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© 1985 The Scandinavian Journal of Economics
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Persson, M., Wissén, P. (1985). Redistributional Aspects of Tax Evasion. In: Førsund, F.R., Honkapohja, S. (eds) Limits and Problems of Taxation. Scandinavian Journal of Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08094-6_4
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DOI: https://doi.org/10.1007/978-1-349-08094-6_4
Publisher Name: Palgrave Macmillan, London
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