The effects of tax evasion on economic growth: a stochastic growth model approach

• Ano de defesa: 2019
• Autor(a) principal: Carvalho, João Lucas de Pinho
• Tipo de documento: Dissertação
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Instituição de defesa: Universidade Federal de Viçosa
• Palavras-chave em Português: Macroeconomia; Sonegação fiscal; Desenvolvimento econômico; Programação dinâmica; Crescimento, Flutuações e Planejamento Econômico
• Link de acesso: https://locus.ufv.br//handle/123456789/26737

The present work aims to analyze the macroeconomic relations between tax evasion and public and private investment and their implications for economic growth through a stochastic growth model in discrete-time. Taxation is important for many aspects for growth. Tax evasion creates negative impacts on the economy such as the fall in gov- ernment revenues, that fund public infrastructure, education and other services. When private capital and public spending are substitutes in the productive sector, tax evaded can be used by private agents to raise funds to finance private domestic investment, in order to mitigate the negative externalities of tax evasion on productive public spending. We use the stochastic dynamic programming approach to derive the optimal plans for consumption and tax evasion rate. Therefore the effect of tax evasion on economic growth is ambiguous because the trade-off between the gain from tax evasion to disposable in- come and the loss because of the lower productivity due to lower public input. Also, we did the comparative dynamics on optimal values of consumption and tax evasion rate. Changes in the tax rate and penalty have ambiguous effects on optimal consumption and depend on the enforcement parameters of the tax authority, while the effects on optimal tax evasion rate are mostly positive and consistent with theory. Key-words: Macroeconomics, Tax Evasion, Development Economics, Dynamic Program- ming.