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Abstract
This paper addresses tax loopholes that allow firms to exploit borderline cases between legal tax avoidance and illegal tax evasion. In general, tax loopholes are detrimental to a revenue-maximizing government. This may change in the presence of corruption in the tax administration. Tax loopholes may serve as a separating mechanism that helps governments maximize revenues and curb corruption, which may explain why developing countries only gradually close loopholes in their tax codes.
Published Online: 2019-11-30
Published in Print: 2017-08-01
© 2019 by Walter de Gruyter Berlin/Boston
