Progressive taxation and tax morale

Due to strong evidence indicating that tax morale affects actual tax-paying behavior, finding the determinants of tax morale could help both to understand and to fight tax evasion. In this paper we analyze the effect of progressive taxation on individual tax morale using a cross-country approach—a research question that has not been investigated in the existing literature. Our theoretical analysis leads to two testable predictions. First, an individual’s tax morale is higher, the more progressive the tax schedule is. Second, the positive impact of tax progressivity on tax morale declines with income. In our empirical analysis we make use of a unique dataset of tax progressivity measures, namely the World Tax Indicators, and follow most of the tax morale literature by employing the World Values Survey to measure individual tax morale. Controlling for a wide range of potential confounders, we are able to confirm both hypotheses in our empirical analysis.     

Federalism and the shadow economy

This paper analyzes the relationships between federalism and the shadow economy. The theoretical analysis leads to the conclusion that the shadow economy is smaller in federal countries than in unitary states. The mobility of individuals among competing jurisdictions leads policy makers to adopt policies that are more efficient in terms of taxation and public good provision. This increases the return for activities in the formal sector relative to those in the informal one, thus reducing activity in the shadow economy. A cross-sectional empirical analysis of a sample of 73 countries confirms this theoretical prediction.     

Corruption and the shadow economy: an empirical analysis

This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 98 countries. Our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions-based indices of corruption are used. Employing an index of corruption based on a structural model, however, corruption and the shadow economy are complements in countries with low income, but not in high income countries.     

Global corruption and the shadow economy: spatial aspects

Using a large sample of nations, this paper examines the relation between corruption and the shadow economy, focusing especially on geographic spillovers. The results point to complementarity between corruption and the shadow economy. We find evidence of own contagion across nations in both corruption and shadow economy activity, while cross-contagion mostly points to substitution between own shadow economy (corruption) and neighboring corruption (shadow economy). These findings are fairly robust across different estimation techniques and measures of the shadow economy.     

The influence of direct democracy on the shadow economy

We analyze, both theoretically and empirically, the influence of direct democratic institutions on the size and development of shadow economies. Our model suggests that, as the extent of direct democracy increases, implemented fiscal policies more nearly reflect the preferences of citizens and so reduce their incentives to operate in the informal sector. This theory implies a negative relationship between the extent of direct democracy and the size of the country’s shadow economy. We also theorize that direct democracy has a greater effect in reducing the informal sector when the former is at low or intermediate values and when the electoral system is characterized by a larger district magnitude. An empirical investigation of a sample of 57 democracies confirms our model’s predictions.     

The rise of the shadow economy: An Indian perspective

This study was undertaken to understand the importance of the shadow economy, which is often misunderstood and misquoted. We come to an understanding of why this is an uproar regarding black money generation in India. This paper is an attempt to bring forward past evidences and current situation to understand the system through discussing various points of views in the literature. The paper concludes with bringing out the difference in black wealth and black money and the impact of both on the economy and answers the question—Is black money really bad for the economy? It is a hope that these results will be useful to policymakers and stakeholder to make policies that cater to all.     

Visualizing the invisible hands: the shadow economy in North Korea

Abstract

The outside world is well aware of the totalitarian side of North Korea. Much less well-known is the shadow economy of the country which has enveloped the everyday lives of ordinary North Koreans for the last fifteen years or so. Based on refugee testimonies, this article aims to shed light on this heretofore unexamined aspect of the country, by visualizing the invisible hands of the ever-growing shadow economy in North Korea. In particular, we will investigate who the main actors are (the agency question), how they obtain their items (the supply mechanism), how they move items from one place to another (the distribution mechanism) and who consumes these items (the consumer question) in contemporary North Korean society.     

The political economy of sales taxes and sales tax exemptions

I analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or tax exemptions, given the constraint that politicians want to raise a certain amount of revenue. Using data on sales taxes, I develop a model predicting a positive relationship between the number of exemptions and the sales tax rate. The estimation results provide support for this prediction. Each additional exemption is associated with an increase of between 0.10 and 0.25 percentage points in the tax rate.

     

The shadow economy and sustainable development: The role of financial development

This paper provides fresh evidence concerning the threshold relationship between the shadow economy and financial development. Shadow economy is quoted as an obstacle to sustainable development and therefore the role of financial development is examined in this paper to tackle the issue of shadow economy. It is based on panel data of 29 developed and developing countries over the period of 1975–2015 and use of panel threshold model. Three proxies for financial development—liquid liabilities, private credit to deposit money banks, and stock market capitalisation—were utilised to obtain the threshold value of US$33,600 Gross Domestic Product (GDP) per capita. This threshold helps to determine the impact of financial development on the size of the shadow economy. Empirical results suggest that above this threshold, financial development significantly contributes to the reduction in size of the shadow economy while it has no impact for countries that have per capita income below this threshold. This implies that, countries with lower per capita income (below $33,600) should implement policies to improve accessibility to finance and credit market which leads to a sufficiently higher per capita income that in turn allows for a reduction in the size of the shadow economy.     

Globalization, secessionism, and autonomy

This paper analyzes the relationship between the persistence and growth of secessionist parties in democratic countries and economic globalization, controlling for political and economic factors. The implications of secessionist persistence for decentralization are also examined. The paper finds that globalization is positively related to secessionist vote growth, while there is some evidence that economic conditions also impact secessionist parties in systematic ways. Secessionist support is also substantially affected by policy changes. Central governments have offered autonomy more often to regions with secessionist parties than to regions without such parties, though often the offers take the form of symmetrical countrywide decentralization.     

Neutrality,autonomy, and power

This paper critically examines Alan Patten’s theory of neutrality of treatment. It argues that the theory assumes an inadequate conception of personal autonomy, which undermines its plausibility. However, I suggest that the theory can resolve the problem by developing and reinterpreting its conception of autonomy and introducing an additional strategy for addressing the power imbalances that result from the market-based interactions between individuals and their conceptions of the good.     

Metis,migrants, and the autonomy of migration

This paper interweaves an ancient conceptualization of movement and mobility with the paradigmatic case of early twentieth-century Chinese migration to the USA in order to explore migrants’ ability to both re-interpret institutional control of movement and generate identities that garner institutional and community acceptance. By not ‘settling’ migrants into the discourse of (undocumented) immigrants, the paper (i) develops a framework for the study of migrants–state interactions that goes beyond claims to citizenship and demands for rights and (ii) explores practices and means through which migrants gain access to restricted territories and maintain presence in otherwise unwelcoming communities. The paper argues that such practices explicate the autonomy of migration: a phenomenon that is constitutive to processes of political transformation and is critical to the study of state sovereignty, citizenship rights, and political agency.     

Local political leaders and context awareness: identifying perceptions of autonomy and efficacy

Leadership theories fail to explain how leaders acquire and interpret context. This article claims that political leadership styles articulate a choice of action that results from the leader's discerned possibilities to act. In order to explore these interpreted contextual determinants of leadership styles and the degree to which “possibility” has an influence over them, our research used a multiple case study design, with extensive interviews. Focusing on context awareness as a way of unveiling style determinants, I claim that it will produce different effects on leadership styles as a consequence of the leader's sense of autonomy and of political efficacy.     

On the political economy of national tax revenue forecasts: evidence from OECD countries

Sustainable budgets are important quality signals for the electorate. Politicians might thus have an incentive to influence tax revenue forecasts, which are widely regarded as a key element of national budget plans. Looking at the time period from 1996 to 2012, we systematically analyze whether national tax revenue forecasts in 18 OECD countries are biased due to political manipulation. Drawing on theories from the field of political economy, we test three hypotheses using panel estimation techniques. We find support for partisan politics. Left-wing governments seem to produce more optimistic, or less pessimistic, tax revenue forecasts than do right-wing ones. Contrary to the theoretical prediction based on the “common pool” problem, we find that more fragmented governments and parliaments tend to produce more pessimistic, or less optimistic, tax revenue forecasts. We find no empirical evidence that political business cycles play a role in tax revenue forecasts.     

Transnationalism,neo-liberalism,and the rise of the shadow state

This paper examines the processes through which a neo-liberal agenda is broadened and entrenched through time. The case study focuses on a federal immigration policy in Canada in the 1980s, which encouraged the rapid entry of wealthy entrepreneurs and investors from Hong Kong. One of the many impacts of the arrival of this Chinese business élite in British Columbia was the rapid growth of a key volunteer organization in Vancouver dedicated to social service provisioning for immigrants. With the donations and volunteerism of the new Chinese arrivals, this organization grew from a small, narrowly focused social service institution, to one of the largest and most extensive providers in the lower Mainland, supplying numerous goods and services formerly controlled primarily by the province and the federal government. As a result of the actions of this voluntary organization, a type of interstitial organization that some scholars have termed under the rubric, 'the shadow state', conservative politicians in the 1980s were able to roll back many welfare state programmes in British Columbia without a corresponding loss of legitimacy occurring from the immediate truncation of services. The Business Immigration Programme thus aided in the entrenchment of a neo-liberal agenda both through the increased circulation of capital and articulation with Asian networks, and also through the devolution of direct welfare-state governance. I argue that this immigration programme thus represents one good example of the multiple ways that seemingly simple policy shifts can have much broader effects, and can entrench neo-liberal policy socially,culturally and institutionally as well as economically.     

Tax rates, tax administration and income tax evasion in Switzerland

This paper contains an empirical analysis of income tax noncompliance in Switzerland, based on the standard model of tax evasion. Noncompliance is found to be positively related to the marginal tax burden and negatively to the probability of audit, though the latter impact is only weak. There is no evidence of a significant deterrent effect of the penalty tax. The extended model reveals that noncompliance is positively related to inflation. Finally, noncompliance is significantly lower when citizens/taxpayers have direct control over government budgets, whereas the opposite holds when there is no such control.