relation: https://publications.ut-capitole.fr/id/eprint/47789/ title: Welfare-improving tax evasion creator: Canta, Chiara creator: Cremer, Helmuth creator: Gahvari, Firouz subject: B- ECONOMIE ET FINANCE description: We study optimal income taxation in a two-group framework where the private cost of misreporting income is positively correlated with productivity. We show that, if high-wage types always reveal their income truthfully, letting low-wage types cheat would lead to Pareto-superior outcomes regardless of the audit costs (as compared to deterring them). When there is no cheating, redistribution takes place on first- or second-best frontiers with the low-wage types always ending up worse off than the high-wage types. Letting low-wage types conceal their income reduces the need to recourse to second-best mechanisms for redistribution. Additionally, it increases the reach of first-best redistribution to outcomes at which low-wage types are better off than high-wage types. publisher: Blackwell date: 2024-01 type: Article type: PeerReviewed format: text language: en identifier: https://publications.ut-capitole.fr/id/eprint/47789/1/wp_tse_1121.pdf identifier: Canta, Chiara , Cremer, Helmuth and Gahvari, Firouz (2024) Welfare-improving tax evasion. Scandinavian Journal of Economics, vol. 126 (n° 1). pp. 98-126. relation: http://tse-fr.eu/pub/128049 relation: 10.1111/sjoe.12539 identifier: 10.1111/sjoe.12539 doi: 10.1111/sjoe.12539 language: en