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Introduction

### Historical persistence and recent examples
- Tax amnesties have shown an "extraordinary resilience over the centuries."
- The first documented tax amnesty is on the Rosetta Stone (200 B.C.) in Egypt (it provided for the release from prison of tax evaders).
- A recent high-profile example is Italy’s Scudo Fiscale (2001), which targeted undeclared offshore capital and enabled the repatriation of some €60 billion.
- Within the United States, a surge in tax amnesty programs among states occurred in the late 1990s and early 2000s owing to a combination of dwindling fiscal revenue and mandatory balanced budget constraints.

### Perceived short- and medium-term benefits
- Policymakers often view tax amnesty programs as producing both short- and medium-term benefits.
- Short-term: amnesties become an additional source of revenue; "the gross revenue collected through an amnesty can amount to a few percentage points of the targeted tax collection, and in some cases can be significant."
- Medium-term: a successful tax amnesty program is expected to increase the tax base and therefore future revenue collection, as tax evaders are brought into the tax net.
- Equity arguments: amnesties can reduce disparity in effective tax rates between evaders and law-abiding taxpayers, improving horizontal equity and potentially vertical equity when tax-evasion motives and opportunities increase with income.
- Some amnesties are designed to repatriate flight capital for broader macroeconomic aims (balance of payments, domestic investment, financial system considerations).

### Costs, behavioral responses, and measurement issues
- The perceived benefits of tax amnesty programs are often overstated and may not exceed program costs, which are "rarely measured."
- Short-term gross revenue gains are commonly used as the benchmark, but this ignores:
  - (1) any eventual reduction in taxpayer compliance (loss of credibility of the tax administration and adverse incentive effects);
  - (2) the direct cost of administering the amnesty (administrative resources, advertising, etc.);
  - (3) the cost in forgone tax revenue (the incentive component of a tax amnesty program, such as waived penalties and interest rates, for all tax evaders, even though some of them would have been detected by the tax administration and would have eventually paid these financial penalties).
- Over the medium term, the largest cost can be a reduction in future tax compliance via several behavioral channels:
  - Expectation of future amnesties reduces the cost of evasion and can make evasion optimal at the margin.
  - Observed "successful" amnesties can update taxpayers' beliefs about detection probabilities, potentially increasing evasion.
- Intertemporal revenue effects:
  - Amnesties may bring forward revenue from identified evaders.
  - In the immediate post-amnesty year, decreases in revenue from settlements, fines, and penalties are likely.
- Measurement bias: short-term benefits are easier to quantify than longer-term compliance costs, reinforcing policymakers' preference for amnesties given political horizons ("high discount rate").

### Alternatives and recommended principles
- Alternatives exist in both short and medium term that target weak tax compliance, the root problem.
- Common causes of weak compliance: (1) weak administration, (2) a weak legal system (or enforcement of the law), and (3) inadequate tax policy (for example, a tax system that is too complex, regressive taxes, high tax rates).
- Short-term and medium-term alternative measures that have been successfully applied include:
  - Payment installment agreements (including in situations of economic crisis).
  - Extended payment installment arrangements.
  - Permanent programs to encourage voluntary disclosure of violations.
- General recommendation: avoid up-front write-offs of tax liabilities, including interest and penalties.

### Structure of the paper
- Chapter 2 defines "tax amnesty" and provides an overview of types of tax amnesties.
- Chapter 3 reviews the economic literature on tax amnesties and summarizes key results.
- Chapter 4 describes recent trends and presents recent econometric evidence and various state and country case studies.
- Chapter 5 highlights alternative policy measures to a tax amnesty.
- Chapter 6 presents some broad conclusions.

*Source: _chpt1*

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_Source: https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/nft/books/2008/taxam/_chpt1.pdf_