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Jordi Sarda - One of the best experts on this subject based on the ideXlab platform.
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Size and causes of the Underground Economy in Spain: a correction of the record and new evidence from the MCDR approach
European Journal of Law and Economics, 2015Co-Authors: Michael Pickhardt, Jordi SardaAbstract:We review existing estimates of the size of the Spanish Underground Economy, apply the Ahumada et al. (Rev Income Wealth 53(2):363–371, 2007 ) correction procedure to some of them and calculate the size of the Underground Economy in Spain for the period 1960–2009 by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sardà (Eur J Law Econ 32(1):143–163, 2011) . We then extend the MCDR approach with respect to an analysis of the causes of the Spanish Underground Economy. Contrary to most other studies, we show that the latter is not predominantly caused by tax pressure, but by labor market aspects, macroeconomic influences and criminal activities. Based on these findings we derive some unprecedented policy recommendations.
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the hard shadow of the greek Economy new estimates of the size of the Underground Economy and its fiscal impact
Applied Economics, 2014Co-Authors: Wolfram Berger, Michael Pickhardt, Athanassios Pitsoulis, Aloys Prinz, Jordi SardaAbstract:This article presents new estimates of the Greek Underground Economy and explores the link between the Underground Economy and aggregate debt. We show that the Greek Underground Economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the Underground Economy is positively related to the debt-to-GDP ratio, implying that fighting the Underground Economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the Underground Economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.
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The size of the Underground Economy in Germany: a correction of the record and new evidence from the modified-cash-deposit-ratio approach
European Journal of Law and Economics, 2011Co-Authors: Michael Pickhardt, Jordi SardaAbstract:Based on the Ahumada et al. (Rev Income Wealth 53(2):363–371, 2007 ) critique we revise existing estimates of the size of the German Underground Economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German Underground Economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio approach, which is not subject to the recent critique and apply it to Germany for the period 1960–2008.
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size and causes of the Underground Economy in spain a correction of the record and new evidence from the mcdr approach
Research Papers in Economics, 2011Co-Authors: Michael Pickhardt, Jordi SardaAbstract:We review existing estimates of the size of the Spanish Underground Economy, apply the Ahumada et al. (2007, RIW) correction procedure to some of them and calculate the size of the Underground Economy in Spain for the period 1960 through 2009 by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sarda (2011, EJLE). We then extend the MCDR approach with respect to an analysis of the causes of the Spanish Underground Economy. Contrary to most other studies, we show that the latter is not predominantly caused by tax pressure, but by labor market aspects, macroeconomic influences and criminal activities. Based on these findings we derive some unprecedented policy recommendations.
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the size of the Underground Economy in germany a correction of the record and new evidence from the modified cash deposit ratio approach
Research Papers in Economics, 2010Co-Authors: Michael Pickhardt, Jordi SardaAbstract:Based on the Ahumada et al. (2007, Review of Income and Wealth) critique we revise existing estimates of the size of the German Underground Economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German Underground Economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio (MCDR) approach, which is not subject to the recent critique and apply it to Germany for the period 1960 to 2008.
Richard J Cebula - One of the best experts on this subject based on the ideXlab platform.
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the Underground Economy in the u s a preliminary new evidence on the impact of income tax rates and other factors on aggregate tax evasion 1975 2008
Social Science Research Network, 2014Co-Authors: Richard J CebulaAbstract:This empirical study seeks to identify determinants of the Underground Economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the impact of higher federal income tax rates on tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate personal income tax evasion may be an increasing function of the percentage of federal personal income tax returns characterized by itemized deductions and a decreasing function of the Tax Reform Act of 1986 (during the first two years of implementation), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes, and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel. Finally, unpopular wars may provide a secondary benefit for and therefore act as an inducement for greater tax evasion.
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the Underground Economy in the u s a preliminary new evidence on the impact of income tax rates and other factors on aggregate tax evasion 1975 2008
PSL Quarterly Review, 2014Co-Authors: Richard J CebulaAbstract:This empirical study seeks to identify determinants of the Underground Economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the impact of higher federal income tax rates on tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate personal income tax evasion may be an increasing function of the percentage of federal personal income tax returns characterized by itemized deductions and a decreasing function of the Tax Reform Act of 1986 (during the first two years of implementation), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes, and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel. Finally, unpopular wars may provide a secondary benefit for and therefore act as an inducement for greater tax evasion. JEL Codes: G18, G28, H26 Keywords: tax evasion; substitution effect; income effect; incentives; disincentives
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the Underground Economy in the u s a preliminary new evidence on the impact of income tax rates and other factors on aggregate tax evasion 1975 2008
Research Papers in Economics, 2013Co-Authors: Richard J CebulaAbstract:This empirical study seeks to identify determinants of the Underground Economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the net impact of higher federal income tax rates on personal income tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate federal personal income tax evasion may be an increasing function of the percentage of federal personal income tax returns characterized by itemized deductions and a decreasing function of the Tax Reform Act of 1986 (during the first two years of implementation), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes, and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel. Finally, unpopular wars may provide a secondary benefit for and therefore act as an inducement for greater tax evasion.
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an empirical analysis of the impact of government tax and auditing policies on the size of the Underground Economy the case of the united states 1973 94
MPRA Paper, 1996Co-Authors: Richard J CebulaAbstract:This study empirically examines the impact of federal income tax rates, IRS penalties on unpaid tax liabilities, and audit rates by the Internal Revenue Service on the size of the Underground Economy in the United States. Recent data generated by Edgar Feige are used to measure the size of the Underground economy. Based on ordinary least squares estimates, it is found that the maximum marginal personal income tax rate raises the size of the Underground Economy. In addition, the size of the Underground Economy is found to be a decreasing function of both the percentage of tax returns audited and the penalties imposed by the IRS on unpaid taxes.
Michael Pickhardt - One of the best experts on this subject based on the ideXlab platform.
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Size and causes of the Underground Economy in Spain: a correction of the record and new evidence from the MCDR approach
European Journal of Law and Economics, 2015Co-Authors: Michael Pickhardt, Jordi SardaAbstract:We review existing estimates of the size of the Spanish Underground Economy, apply the Ahumada et al. (Rev Income Wealth 53(2):363–371, 2007 ) correction procedure to some of them and calculate the size of the Underground Economy in Spain for the period 1960–2009 by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sardà (Eur J Law Econ 32(1):143–163, 2011) . We then extend the MCDR approach with respect to an analysis of the causes of the Spanish Underground Economy. Contrary to most other studies, we show that the latter is not predominantly caused by tax pressure, but by labor market aspects, macroeconomic influences and criminal activities. Based on these findings we derive some unprecedented policy recommendations.
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the hard shadow of the greek Economy new estimates of the size of the Underground Economy and its fiscal impact
Applied Economics, 2014Co-Authors: Wolfram Berger, Michael Pickhardt, Athanassios Pitsoulis, Aloys Prinz, Jordi SardaAbstract:This article presents new estimates of the Greek Underground Economy and explores the link between the Underground Economy and aggregate debt. We show that the Greek Underground Economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the Underground Economy is positively related to the debt-to-GDP ratio, implying that fighting the Underground Economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the Underground Economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.
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The size of the Underground Economy in Germany: a correction of the record and new evidence from the modified-cash-deposit-ratio approach
European Journal of Law and Economics, 2011Co-Authors: Michael Pickhardt, Jordi SardaAbstract:Based on the Ahumada et al. (Rev Income Wealth 53(2):363–371, 2007 ) critique we revise existing estimates of the size of the German Underground Economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German Underground Economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio approach, which is not subject to the recent critique and apply it to Germany for the period 1960–2008.
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size and causes of the Underground Economy in spain a correction of the record and new evidence from the mcdr approach
Research Papers in Economics, 2011Co-Authors: Michael Pickhardt, Jordi SardaAbstract:We review existing estimates of the size of the Spanish Underground Economy, apply the Ahumada et al. (2007, RIW) correction procedure to some of them and calculate the size of the Underground Economy in Spain for the period 1960 through 2009 by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sarda (2011, EJLE). We then extend the MCDR approach with respect to an analysis of the causes of the Spanish Underground Economy. Contrary to most other studies, we show that the latter is not predominantly caused by tax pressure, but by labor market aspects, macroeconomic influences and criminal activities. Based on these findings we derive some unprecedented policy recommendations.
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the size of the Underground Economy in germany a correction of the record and new evidence from the modified cash deposit ratio approach
Research Papers in Economics, 2010Co-Authors: Michael Pickhardt, Jordi SardaAbstract:Based on the Ahumada et al. (2007, Review of Income and Wealth) critique we revise existing estimates of the size of the German Underground Economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German Underground Economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio (MCDR) approach, which is not subject to the recent critique and apply it to Germany for the period 1960 to 2008.
Bruno Chiarini - One of the best experts on this subject based on the ideXlab platform.
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steady state laffer curve with the Underground Economy
Public Finance Review, 2013Co-Authors: Francesco Busato, Bruno ChiariniAbstract:This article studies equilibrium effects of fiscal policy within a dynamic general equilibrium model where tax evasion and Underground activities are explicitly incorporated. In particular, we show...
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Steady State Laffer Curve with the Underground Economy
SSRN Electronic Journal, 2009Co-Authors: Francesco Busato, Bruno ChiariniAbstract:This paper studies equilibrium effects of fiscal policy within a dynamic general equilibrium model where tax evasion and Underground activities are explicitly incorporated. In particular, we show that a dynamic general equilibrium with tax evasion may give a rational justification for a variant of the Laffer curve for a plausible parameterization. In this respect, the paper also identifies the different parameterization of the model formulation with tax evasion under which a Laffer curve exist. From a revenue maximizing perspective, the key policy messages are that bringing tax payers to compliance would be better than announcing to punish them if convicted, and that an Economy without problems of compliance is much more sensitive to myopic behavior.
Edgar L Feige - One of the best experts on this subject based on the ideXlab platform.
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new estimates of overseas u s currency holdings the Underground Economy and the tax gap
MPRA Paper, 2009Co-Authors: Edgar L FeigeAbstract:Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S. currency amount to $2950. Yet American households and businesses admit to holding only 15 percent of the currency stock, leaving the whereabouts of 85 percent unknown. Some fraction of this unaccounted for currency is held abroad (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions earning income that is not reported to the IRS (the Underground Economy hypothesis). We find that the percentage of U.S. currency currently held overseas is between 30-37 percent rather than the widely cited figure of 65 percent. This finding is based on the official Federal Reserve/Bureau of Economic Analysis data which is a proxy measure of the New York Federal Reserve’s (NYB) “confidential” data on wholesale currency shipments abroad. We recommend that the NYB data be aggregated so as to circumvent confidentiality concerns, and be made readily available in order to shed greater light on the question of how much U.S. currency is abroad while providing important information on the location of overseas U.S. dollars. The newly revised official estimates of overseas currency holdings are employed to determine the Federal Reserve’s seigniorage earnings from 1964-2010, which have provided a $185 billion windfall for U.S. taxpayers. Overseas currency stock data are also used to derive estimates of the domestically held stock of currency as well as narrow and broad measures of domestic monetary aggregates. These domestic monetary aggregates are believed to be better predictors of future economic activity than traditional monetary aggregates and are tested to determine their ability to predict fluctuations in real output and prices. Domestic cash holdings are finally used to estimate the size of the U.S. fiscal Underground Economy as measured by the amount of income that is not properly reported to the IRS. By 2010, “unreported income” approached $2 trillion, implying a “tax gap” in the range of $430- $475 billion. Currently, we estimate that 18-19 percent of total reportable income is not properly reported to the IRS.
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new estimates of overseas u s currency holdings the Underground Economy and the tax gap
Research Papers in Economics, 2009Co-Authors: Edgar L FeigeAbstract:This paper examines the ‘currency enigma” which arises because despite financial innovation that has created important new substitutes for cash usage, U.S. per capita currency holdings now amount to $2700. American households and businesses admit to holding only 15 percent of the stock of currency outside of the banking system. Some fraction of unaccounted for currency is held overseas (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions involving incomes that are not reported to the IRS (the Underground Economy hypothesis). We first revisit the longstanding controversy concerning the fraction of U.S. currency held abroad and find that newly revised estimates of U.S. overseas currency stocks estimates the fraction overseas at 37 percent, rather than the widely cited figure of 65 percent. A more refined proxy places the fraction abroad closer to 30 percent. New estimates of overseas holdings permit calculation of domestic currency holdings, as well as narrow and broad measures of domestic monetary aggregates. These are tested to determine their ability to predict fluctuations in real output and prices. The domestic currency figures are then used to estimate the current amount of “unreported income” which approaches $2 trillion, implying a “tax gap” in 2008 of between $446- $490 billion.
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the Underground Economy and the currency enigma
Research Papers in Economics, 2005Co-Authors: Edgar L FeigeAbstract:The size, growth and causes of the US “Underground Economy” are examined in light of new estimates of foreign holdings of US currency. World dollarization partially resolves the “currency enigma” which refers to the anomaly that roughly 80% of the US currency supply is “missing” and an estimated ten trillion dollars of cash payments can not be accounted for. US currency that is used overseas suggests that there is a world wide unrecorded Economy that could rival the size of the US Economy. Large and variable overseas holdings of US currency imply that monetary aggregates must be redefined to include only domestically held currency. The paper defines and estimates the size of the ‘domestic money supply”. Reference: Proceedings of the 49th Congress of the International Institute of Public Finance, Berlin 1993, Supplement to Public Finance Vol. 49 (1994) pp.119-136.
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overseas holdings of u s currency and the Underground Economy
Social Science Research Network, 2005Co-Authors: Edgar L FeigeAbstract:Many public policy decisions require analytical and empirical knowledge concerning the size, growth, causes and consequences of the ‘Underground Economy”. This paper seeks to clarify the meaning of Underground activity, updates various discrepancy and fiscal estimates of its size and growth, and examines the empirical implications of new evidence concerning the growing use of US currency (dollarization) throughout the world for indirect estimates of the Underground Economy in the U.S. The paper examines all indirect and direct methods of estimating the amount of US currency held abroad and concludes that between 40% -45% of US currency is held abroad. This result stands in sharp contrast to the estimates presented by Porter and Judson (1996) who claim that as much as 55% -70% of US currency is held abroad. The new estimates of overseas currency are used to derive a domestic currency series which is the appropriate variable for use in currency demand models that purport to provide estimates of the size of the Underground Economy. This paper appears in Exploring the Underground Economy: Studies of Illegal and Unreported Activity. Susan Pozo (ed.) W.E Upjohn Institute for Employment Research, Kalamazoo, MI, 1996
