Papp, Tamás K.; Takáts, Elöd - International Monetary Fund (IMF) - 2008
The paper shows how tax rate cuts can increase revenues by improving tax compliance. The intuition is that tax evasion … has externalities: tax evaders protect each other, because they tie down limited enforcement capacity. Thus, relatively … small tax rate cuts, which decrease incentives to evade taxes, can lead to increased revenues through spillovers - creating …