Itemised Deductions: A Device to Reduce Tax Evasion

IEB Working Paper N. 2014/9

24 Pages Posted: 20 Mar 2014

See all articles by Amedeo Piolatto

Amedeo Piolatto

Autonomous University of Barcelona; Barcelona Economics Institute (IEB); Barcelona Graduate School of Economics (Barcelona GSE)

Multiple version iconThere are 2 versions of this paper

Date Written: March 6, 2014


With direct incentives and sanctions being the most common instruments to fight tax evasion, the theoretical literature has tended to overlook indirect schemes, such as itemized deductions, in which one agent has an interest in other agents declaring their revenue. Itemized deductions provide an incentive for consumers to declare their purchases, and this forces sellers to do the same. I show that it is possible to increase tax proceeds by choosing a suitable level of itemized deduction, and this, for any level of taxation. Indeed, the cost for the government on the consumers' side is more than compensated for by the extra proceeds generated on the sellers' side.

Keywords: Tax evasion, itemised deductions, substitute goods, duopoly

JEL Classification: H00, H20, H26, H30

Suggested Citation

Piolatto, Amedeo, Itemised Deductions: A Device to Reduce Tax Evasion (March 6, 2014). IEB Working Paper N. 2014/9, Available at SSRN: or

Amedeo Piolatto (Contact Author)

Autonomous University of Barcelona ( email )

Department of Economics and Economic History
Edifici B - Campus Bellaterra
Barcelona, 08193

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Barcelona Economics Institute (IEB) ( email )

c/ John M. Keynes, 1-11
Barcelona, 08034

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Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005

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