Economic and Compliance Consequences of Taxation

The Economic and Compliance Consequences of Taxation examines the impact of the tax levels (relative to GDP) and the tax mix (direct and indirect taxes relative to GDP) on economic growth and employment, and tax evasion, among other matters. The study embodies the integrated findings of 37 separate working papers released by the New Zealand Inland Revenue over the period 1994-1997. The working papers were mainly written by a team of 10 national economic and tax experts and reviewed by an external team of outside experts comprising Professors Alan Auerbach (UCLA), Richard Bird (University of Toronto), Erwin Diewert (University of British Columbia) and Jack Mintz (University of Toronto). These experts also reviewed the final report. §Key questions addressed by the volume include how many changes in the tax level and mix affect: The level of tax evasion by individuals (working for others), the self-employed and small firms; The tax gap between current and potential tax revenue; and Macroeconomic indicators (the level of economic output, the rate of economic growth, and the rates of unemployment, employment generation and labour force participation) . §Given existing tax system trends, including the current level of taxes and the tax mix (personal, indirect, corporate and other taxes), the specific objectives of the work are to determine whether: Tax evasion is rising or falling; The tax gap is shrinking or widening; and The prospects for economic growth and employment creation are improving or deteriorating. §These objectives can be encapsulated in a summary question which the book attempts to answer: Is the tax system, by virtue of its consequences on the behaviour of individuals, firms and the economy, becoming healthier or not? Thus, are the consequences of the current tax system moving towards a best practice regime?