Tax Amnesties: Theory, Trends, and Some Alternatives
IMF Special Issues, July 29, 2008
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Bibliographic details
- Authors: Eric Le Borgne, Katherine Baer
- Published: July 29, 2008
- Series: IMF Special Issues
- DOI: https://doi.org/10.5089/9781589067363.058
Overview
- Tax amnesties are widely used to raise revenue and increase tax compliance.
- International experience shows that the costs of tax amnesty programs often exceed the programs’ benefits.
- The paper weighs advantages and disadvantages by drawing on: theoretical literature, econometric evidence, and selected country and U.S. state case studies.
- The authors conclude that “successful” tax amnesties are the exception rather than the norm.
- The most successful amnesty programs rely on improving the tax administration’s enforcement capacity.
- Given the potential drawbacks of tax amnesties, a few alternative measures are discussed.
Key findings
- Tax amnesties remain popular as a policy tool but frequently produce net costs that exceed benefits.
- Improvements in tax administration are the essential ingredient for addressing the problems tax amnesties aim to fix.
- Enforcement capacity strengthening is a common feature of the most successful amnesty programs.
- Empirical basis: synthesis of theoretical results, econometric studies, and case-study evidence (including U.S. state cases).
Policy implications and alternatives
- Do not rely on tax amnesties as a routine or primary instrument for revenue or compliance improvements.
- Prioritize improvements in tax administration and enforcement capacity as first-order reforms.
- Consider alternatives (discussed in the paper) when the drawbacks of amnesties outweigh potential short-term revenue gains.
Evidence base and scope
- Methods and sources:
- Theoretical literature on tax amnesties and compliance.
- Econometric evidence assessing impacts of amnesty programs.
- Selected country case studies and U.S. state case studies.
- Tone and conclusion: cautious—amnesties can work in limited circumstances, but success is exceptional and contingent on stronger enforcement.
Subjects and keywords (as listed)
- Subject: Revenue administration, Social security contributions, Tax administration core functions, Tax collection, Tax evasion, Tax return filing compliance, Taxes
- Keywords: amnesty, Asia and Pacific, delinquent taxpayer, ISI, settlement amount, SI, Social security contributions, Tax administration core functions, tax amnesty, tax amnesty program, tax arrears, Tax collection, tax evader, Tax evasion, Tax return filing compliance, tax-evasion benefit, tax-evasion decision, tax-evasion possibility, taxpayer, taxpayer anonymity, taxpayer register
Tax Amnesties: Theory, Trends, and Some Alternatives — By Eric Le Borgne and Katherine Baer, July 29, 2008.