TY  - RPRT
        AU  - Canta, Chiara
AU  - Cremer, Helmuth
AU  - Gahvari, Firouz
        TI  - Welfare Improving Tax Evasion
        PY  - 2020/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 13483
        UR  - https://www.iza.org/index.php/publications/dp13483
        AB  - 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.
        KW  - audits
KW  - tax evasion
KW  - optimal taxation
KW  - welfare-improving
        ER  -