%0 Report
        %A Canta, Chiara
%A Cremer, Helmuth
%A Gahvari, Firouz
        %T Welfare Improving Tax Evasion
        %D 2020
        %8 2020 Jul
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 13483
        %U https://www.iza.org/index.php/publications/dp13483
        %X We study optimal income taxation in a framework where one's willingness to report his income truthfully is positively correlated with his type. We show that allowing low-productivity types to cheat leads to Pareto-superior outcomes as compared to deterring them, even if audits can be performed costlessly. When there is no cheating, redistribution takes place on first- and second-best frontiers and can never make low-ability types more well-off than high-ability types. Letting low-ability types cheat allows first-best redistribution up to a limit at which low-ability types are better off than high-ability types.
        %K audits
%K tax evasion
%K optimal taxation
%K welfare-improving