Citation:
[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [ISSN:] 1864-6042 [Volume:] 1 [Issue:] 2007-6 [Publisher:] Kiel Institute for the World Economy (IfW) [Place:] Kiel [Year:] 2007 [Pages:] 1-32
Abstract:
Differential tax analysis is used to show how the socially optimal fiscal-tax to liquidity-tax ratio changes with the relative size of the tax-evading hidden economy. The smaller the relative size of the hidden economy, the larger the optimal fiscal-tax to liquidity-tax ratio. The empirical cross-section and panel evidence supports this theoretical result.