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International Institute of Public Finance

2010 IIPF Annual Congress

The 66th IIPF Congress was held at Uppsala University, Sweden, from 23 to 26 August 2010. Its keynote addresses dealt with Tax Evasion, Tax Avoidance and Shadow Economy, but, as tradition dictates, outstanding papers on all areas of public finance were accepted. The scientific program, chaired by Friedrich Schneider and Clemens Fuest, consisted of five plenary lectures, one panel discussion and over 250 contributed papers.

The Opening Ceremony was headed by Robin Boadway , President of the International Institute of Public Finance, Kerstin Sahlin, Vice President Uppsala University and Sören Blomquist, Chairman of the Local Organising Committee.

With an attendance of almost 400 delegates from all around the world, the 66th IIPF Congress reviewed 254 papers in 80 sessions spread throughout the four days from Monday through Thursday.

 

   Agnar Sandmo

Monday morning two Plenary Lectures were held. The first, delivered by Agnar Sandmo (Norwegian School of Economics and Business Administration) had the title An evasive topic: Theorizing about the hidden economy. The lecture reviewed the portfolio approach of the Allingham-Sandmo (1972) model and discussed various extensions. Particular attention was paid to the question of whether the model predicts too much tax evasion relative to what we know about its real extent. The interaction between tax evasion and labour supply, thus providing a link between the portfolio approach and the study of the hidden economy was covered as was indirect tax evasion by firms and the closely related topic of smuggling. Policy implications of the analysis with reference to the theories of optimal taxation and optimal enforcement was discussed. The lecture also briefly discussed the international dimensions of tax evasion with reference to the existence of “tax havens”, as well as the implications of the analysis for the viability of the welfare state.

 

 

James Alm   

The second Plenary Session was devoted to a paper by James Alm (Tulane University) entitled Measuring, explaining, and controlling tax evasion: Lessons from theory, experiments, and field studies. In his lecture professor Alm assessed what we have learned about tax evasion since Allingham and Sandmo launched the modern analysis of tax evasion in 1972.  Alm focused on three specific questions and the answers to these questions that have emerged over the years.  First, how do we measure the extent of evasion?  Second, how can we explain these patterns of behavior?  Third, how can we use these insights to control evasion?  He illustrated his own answers to these questions by highlighting various specific examples of research.  His main conclusion is that we have learned many things but that we also still have many gaps in our understanding of how to measure, explain, and control tax evasion.  He also gave some suggestions ¬ and some predictions ¬ about where promising avenues of future research may lie.

 

 

 

   Joel Slemrod

On the second day of the Congress, Joel Slemrod (University of Michigan) presented a paper co-authored with Caroline Weber with the title Signals or Just Noise? Measurement issues in the Analysis of Tax Evasion and the Informal Economy. In his lecture Slemrod argued that the analysis of tax evasion and the informal economy must proceed even in the absence of the direct observability of key variables. He critically reviewed what can be learned about the magnitude and determinants of tax evasion and the informal economy, at both the micro and macro levels, under given conditions and assumptions. He argued that theory should guide the construction and interpretation of evidence of the “invisible.” In light of his conclusions, he then examined and evaluated a wide range of econometric strategies. The most successful strategies take advantage of an observable measure of the reported tax base, an indisputable cause or a trace of the invisible activity.

 

 

Lars P. Feld   

The third day's plenary session was presented by  Lars P. Feld (University of Heidelberg). The topic of his lecture was How the Government Affects Tax Compliance: Evidence from (Central) Europe. Professor Feld presented results for the German case. Germany is particularly interesting because it considerably increased deterrence to fight tax non-compliance recently. The data set used for this analysis contains several waves of survey data conducted between 2004 and 2009 (during the campaign against tax non-compliance) and also allows for a comparison with earlier data from 2001 (before that campaign). According to the evidence, (subjectively perceived) deterrence has the expected negative impact on undeclared work and tax evasion, but the influence of social norms, in particular tax morale, is stronger.

 

 

On the third day of the congress there was also a Panel Session on Tax Evasion and Avoidance in Developing Countries with panellists: Friedrich Schneider, Jack Mintz, Govinda Rao and Matthias Witt. This session was co-organized with GTZ-ITC.

 

   Brian B. Erard

On the Congress's last day, the keynote lecture for the plenary session was delivered by Brian B. Erard (Brian Erard and Associates)  Topic: The U.S. Federal Income Tax Gap: What We See and What We Don't. Measuring, understanding, and addressing the tax gap – the difference between what taxpayers voluntarily report and pay and what they actually owe – is a vexing problem for tax administrations around the world. In his lecture Erard provided an overview of the approach used by the Internal Revenue Service (IRS) to assess the U.S. federal individual income tax gap. This approach relies heavily on random auditing methods. A desirable feature of this approach is that it yields a direct and nationally representative assessment of how much noncompliance tax examiners are able to identify on tax returns. However, willful tax evaders often undertake considerable efforts to conceal their misreporting, and examiners are not always successful in uncovering this activity. The IRS therefore attempts to assess not only the portion of the tax gap that we see from the audit results, but also the portion that we don’t. I review the methodology behind this approach and also consider the potential uses and misuses of both sets of estimates. Large scale random audit programs are costly and challenging to implement. For many countries, such an approach is simply not a viable option; and even in the U.S., it is employed only selectively for certain types of taxes. Erard considered some potential alternatives for tax administrations when attempting to gauge the level of tax compliance.

The Congress ended with the awarding of the IIPF Young Economists Award and the 2010 Peggy and Richard Musgrave Prize.

 

 

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