Franzoni, Luigi Alberto --- "Tax Evasion and Avoidance" [2009] ELECD 465; in Garoupa, Nuno (ed), "Criminal Law and Economics" (Edward Elgar Publishing, 2009)

Book Title: Criminal Law and Economics

Editor(s): Garoupa, Nuno

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847202758

Section: Chapter 12

Section Title: Tax Evasion and Avoidance

Author(s): Franzoni, Luigi Alberto

Number of pages: 30

Extract:

12 Tax evasion and avoidance
Luigi Alberto Franzoni


1. Introduction
Collecting taxes from recalcitrant taxpayers requires effective enforcement
rules and a dedicated administration. Over the last 40 years, a large body
of literature has investigated the phenomenon of compliance to identify
the forces that determine decisions to evade and to devise methods to
raise compliance rates. The `law and economics' approach to tax evasion
is based on the hypothesis that compliance is essentially an economic
decision and can thus be analysed using the tools of standard economic
theory.
One of the first attempts to investigate tax evasion using the tools
of economics was Cesare Beccaria's `An Attempt at an Analysis of
Smuggling' (1764). Beccaria developed a mathematical model to calcu-
late the likely amount of goods smuggled, given the amount of goods
recovered by customs officials. Further inquiries were carried out during
the Enlightment by such precursors of the law and economics approach
as Jeremy Bentham and Montesquieu. In that period, scholars sought to
devise laws that could withstand rational scrutiny. Sanctions and enforce-
ment were the object of special attention: they had to be such as to attain
their purported goal without needless suffering. Law enforcement had to
be taken out of the closet of arbitrary power and exposed to the light of
reason and public accountability.
The rational approach of the Classical School was soon superseded by
alternative theories of the biological and social roots of crime, driving a
wedge between crime theory and economic theory. For ...