Tax evasion by tax deferment: Sham litigation with an informal credit market

Article Type

Research Article

Publication Title

European Journal of Political Economy

Abstract

We show theoretically how tax evasion is facilitated by informal credit market through tax deferment. Our model is empirically based. Using sham litigation, tax evaders earn a higher rate of return than the stipulated penalty rate for tax evasion while the government loses tax revenue. We propose an upfront part–payment of the disputed amount of tax as a solution to the form of tax evasion we describe.

DOI

10.1016/j.ejpoleco.2021.102008

Publication Date

9-1-2021

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