This paper is the first to provide evidence of efficient taxation of groups with heterogeneous levels of 'tax morale'. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that 'nice guys finish last': groups with higher...

Interrelationship between optimal fiscal policy and property structure is analyzed in the general equilibrium model with government playing Ramsey planner role and private and public sectors responding rationally to the government actions. In first best allocations with 100% profit taxation and...

This paper develops a dynamic general equilibrium model where employers may avoid making social security contributions by offering some workers "secondary contracts". When calibrated using aggregate tax revenue data, the model delivers estimates of secondary "off the books" employment that are...

We study optimal fiscal policy in a standard incomplete-markets model with uninsurable idiosyncratic income risk, where a Ramsey planner chooses time-varying paths of proportional capital and labor income taxes, lump-sum transfers (or taxes), and government debt. We find that: (1) short-run...

Half of the jobs in the U.S. feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses, when such labor contracts arise from moral hazard frictions within firms. Optimal taxes account...

This paper develops a dynamic general equilibrium model where employers may avoid making social security contributions by offering some workers "secondary contracts". When calibrated using aggregate tax revenue data, the model delivers estimates of secondary "off the books" employment that are...

In the presence of distortionary taxation, the destruction of wealth–either by an act of government or an act of God–can be welfare improving, because it increases the supply of labor and therefore (holding government spending constant) allows distortionary taxes to be lowered. We show that...

As a response to a changing labour market scenario and to the concerns for increasing costs and bad incentives of traditional income support policies, the last decades have witnessed, in many countries, reforms introducing more sophisticated designs of means-testing, eligibility and tagging. In...

Presumptive income taxes in the form of a tax on turnover for SMEs are pervasive as a way to reduce the costs of compliance and administration. We analyze a model where entrepreneurs allocate labor to the formal and informal sectors. Formal sector income is subjected either to a corporate income...

Objective - The aim of the study is to determine the optimality of taxation based on a comparative analysis of income taxation in developed and developing countries.Methodology/Method - The theoretical and methodological basis of the research is the main provisions of the market economy,...