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A Tax Regulatory Laffer Curve

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Better Business Regulation in a Risk Society

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Abstract

In this chapter, attention is drawn to the regulatory costs of taxation. From an economic point of view, tax regulatory costs are discussed. First, a theoretical Laffer-curve for tax regulatory costs is developed. Next, an overview is given of literature on tax regulatory costs. Finally, some remarks are made about the incidence of a tax regulatory Laffer curve.

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Notes

  1. 1.

    There are also psychological costs that can be proxied by the services of tax advisors.

  2. 2.

    According to Moody et al. (2005) small business in USA beared the majority of tax compliance costs, or 56% of total compliance costs in 2005.

  3. 3.

    It is interesting to point out that TAS research function obtained this estimate by multiplying the number of copies of each form filed for tax year 2008 by the average amount of time the IRS estimated it took to complete the form. This method most likely underestimates the costs because all sorts of forms are not accounted for (i.e. responding of taxpayers to post-filing notices, examinations). On the other hand, they might be overestimated due to the technology improvements that enabled various tax software. That might be the reason why the aggregate burden fell down from 7.6 billion in 2008 to 6.1 in 2010. However, these gains do not accrue to small and medium enterprises (taxpayers). Therefore, we can conclude that inequality of compliance costs burden is rising. There are also differences in compliance costs burden reported by different studies even though they use the same methodology. Slemrod determined that compliance costs constitute about 13% of income tax receipts, and tax foundation even 22%! (http://www.taxfoundation.org/research/show/1281.html).

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Author information

Authors and Affiliations

  1. Faculty of Economics, University of Rijeka, Rijeka, Croatia

    Saša Drezgić

  2. Advisor on tax enforcement policy at the Netherlands Tax and Customs Administration, The Hague, The Netherlands

    Peter Pronk

Authors
  1. Saša Drezgić
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  2. Peter Pronk
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Correspondence to Saša Drezgić .

Editor information

Editors and Affiliations

  1. Jouy-en-Josas, 78351, France

    Alberto Alemanno

  2. Amsterdam, 1081 HV, Netherlands

    Frank den Butter

  3. Schoonhoven, 2871 PM, Netherlands

    André Nijsen

  4. Surrey, GU2 7XH, United Kingdom

    Jacopo Torriti

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Drezgić, S., Pronk, P. (2012). A Tax Regulatory Laffer Curve. In: Alemanno, A., den Butter, F., Nijsen, A., Torriti, J. (eds) Better Business Regulation in a Risk Society. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-4406-0_15

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