Tax evasion, fiscal policy and public debt: Evidence from Spain
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http://hdl.handle.net/10045/136457
Title: | Tax evasion, fiscal policy and public debt: Evidence from Spain |
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Authors: | Meroño Herranz, Moisés | Turino, Francesco |
Research Group/s: | Análisis Económico |
Center, Department or Service: | Universidad de Alicante. Departamento de Fundamentos del Análisis Económico |
Keywords: | Underground economy | Tax evasion | Fiscal policy | DSGE | Bayesian estimation | Spain |
Issue Date: | 7-Jul-2023 |
Publisher: | Elsevier |
Citation: | Economic Systems. 2023, 47(3): 101121. https://doi.org/10.1016/j.ecosys.2023.101121 |
Abstract: | We reconsider the macroeconomic effects of fiscal policy in an estimated dynamic stochastic general equilibrium model with limited tax enforcement. The results of the Bayesian estimation provide evidence in favor of a sizeable underground sector in Spain, with the associated tax evasion having contributed, on average, to 23% of public debt accumulation over the period 1985–2015. From the standpoint of fiscal policy, the estimated results show that the presence of tax evasion triggers a resource-reallocation mechanism that dampens the effects on economic activity caused by an increase in government spending, while it amplifies those due to changes in tax rates. Because of this mechanism, we show that tax-based consolidation plans may become completely ineffective in reducing the debt-to-GDP ratio if tax enforcement is imperfect. Moreover, by characterizing the long-run Laffer curve, we show that the actual taxation in Spain is inefficiently too high, in the sense that the government might increase tax revenues by cutting the actual tax rates on both corporate and personal income. |
Sponsor: | Francesco Turino thanks the Consellería de Innovación, Universidades, Ciencia y Sociedad Digital de la Generalitat Valenciana (Grant CIPROM/2021/060) and Ministerio de Ciencia e Innovación (Project PID2019-111208GB-I00) for financial support. |
URI: | http://hdl.handle.net/10045/136457 |
ISSN: | 0939-3625 (Print) | 1878-5433 (Online) |
DOI: | 10.1016/j.ecosys.2023.101121 |
Language: | eng |
Type: | info:eu-repo/semantics/article |
Rights: | © 2023 Elsevier B.V. |
Peer Review: | si |
Publisher version: | https://doi.org/10.1016/j.ecosys.2023.101121 |
Appears in Collections: | INV - Análisis Económico - Artículos de Revistas |
Files in This Item:
File | Description | Size | Format | |
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Merono_Turino_2023_EconSyst_accepted.pdf | Embargo 24 meses (acceso abierto: 8 jul. 2025) | 2,09 MB | Adobe PDF | Open Request a copy |
Merono_Turino_2023_EconSyst_final.pdf | Versión final (acceso restringido) | 4,87 MB | Adobe PDF | Open Request a copy |
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