Tax evasion, inequality, and progressive taxes : a political economy perspective

The standard approach to tax compliance applies the economics-of-crime methodology pioneered by Becker (1968): in its first application, due to Allingham and Sandmo (1972) it models the behaviour of agents as a decision involving a choice of the extent of their income to report to tax authorities, given a certain institutional environment, represented by parameters such as the probability of detection and penalties in the event the agent is caught. While this basic framework yields important insights on tax compliance behavior, it has some critical limitations. Specifically, it indicates a level of compliance that is significantly below what is observed in the data. This thesis revisits the original framework with a view towards addressing this issue, and examining the political economy implications of tax evasion for progressivity in the tax structure. The approach followed involves building a macroeconomic, dynamic equilibrium model for the purpose of examining these issues, by using a step-wise model building procedure starting with some very simple variations of the basic Allingham and Sandmo construct, which are eventually integrated to a dynamic general equilibrium overlapping generations framework with heterogeneous agents. One of the variations involves incorporating the Allingham and Sandmo construct into a two-period model of a small open economy of the type originally attributed to Fisher (1930). A further variation of this simple construct involves allowing agents to initially decide whether to evade taxes or not. In the event they decide to evade, the agents then have to decide the extent of income or wealth they wish to under-report. We find that the ‘evade or not’ assumption has strikingly different and more realistic implications for the extent of evasion, and demonstrate that it is a more appropriate modeling strategy in the context of macroeconomic models, which are essentially dynamic in nature, and involve consumption smoothing across time and across various states of nature. Specifically, since deciding to undertake tax evasion impacts on the consumption smoothing ability of the agent by creating two states of nature in which the agent is ‘caught’ or ‘not caught’, there is a possibility that their utility under certainty, when they choose not to evade, is higher than the expected utility obtained when they choose to evade. Furthermore, the simple two-period model incorporating an ‘evade or not’ choice can be used to demonstrate some strikingly different political economy implications relative to its Allingham and Sandmo counterpart. In variations of the two models that allow for voting on the tax parameter, we find that agents typically choose to vote for a high degree of progressivity by choosing the highest available tax rate from the menu of choices available to them. There is, however, a small range of inequality levels for which agents in the ‘evade or not’ model vote for a relatively low value of the tax rate. The final steps in the model building procedure involve grafting the two-period models with a political economy choice into a dynamic overlapping generations setting with more general, non-linear tax schedules and a ‘cost-of evasion’ function that is increasing in the extent of evasion. Results based on numerical simulations of these models show further improvement in the model’s ability to match empirically plausible levels of tax evasion. In addition, the differences between the political economy implications of the ‘evade or not’ version of the model and its Allingham and Sandmo counterpart are now very striking; there is now a large range of values of the inequality parameter for which agents in the ‘evade or not’ model vote for a low degree of progressivity. This is because, in the ‘evade or not’ version of the model, low values of the tax rate encourages a large number of agents to choose the ‘not-evade’ option, so that the redistributive mechanism is more ‘efficient’ relative to the situations in which tax rates are high. Some further implications of the models of this thesis relate to whether variations in the level of inequality, and parameters such as the probability of detection and penalties for tax evasion matter for the political economy results. We find that (i) the political economy outcomes for the tax rate are quite insensitive to changes in inequality, and (ii) the voting outcomes change in non-monotonic ways in response to changes in the probability of detection and penalty rates. Specifically, the model suggests that changes in inequality should not matter, although the political outcome for the tax rate for a given level of inequality is conditional on whether there is a large or small or large extent of evasion in the economy. We conclude that further theoretical research into macroeconomic models of tax evasion is required to identify the structural relationships underpinning the link between inequality and redistribution in the presence of tax evasion. The models of this thesis provide a necessary first step in that direction.

Critical discourse analysis and political economy of communication : understanding the new corporate order

This article uses critical discourse analysis to analyse material shifts in the political economy of communications. It examines texts of major corporations to describe four key changes in political economy: (1) the separation of ownership from control; (2) the separation of business from industry; (3) the separation of accountability from responsibility; and (4) the subjugation of ‘going concerns’ by overriding concerns. The authors argue that this amounts to a political economic shift from traditional concepts of ‘capitalism’ to a new ‘corporatism’ in which the relationships between public and private, state and individual interests have become redefined and obscured through new discourse strategies. They conclude that the present financial and regulatory ‘crisis’ cannot be adequately resolved without a new analytic framework for examining the relationships between corporation, discourse and political economy.

Australian copyright regimes and political economy of music

In this chapter I review the history of copyright in Australia through a singular and exemplary ruling of the Australian High Court made in 2012 and then relate that to the declining fortunes of Australian recorded music professionals. The case in point is Phonographic Performance Company [PPCA] of Australia Limited v Commonwealth of Australia [2012] HCA 8 (hereafter, HCA 8 2012). The case encapsulates the history of copyright law in Australia, with the judicial decision drawing substantive parts of its rationale from the Statute of Anne (8 Anne, c. 19, 1710), as well as copyright acts that regulated the Australian markets prior to 1968. More importantly the High Court decision serves to delineate some important political economic aspects of the recorded music professional in Australia and demonstrates Attali’s (1985) assertion that copyright is the mechanism through which composers are, by statute, literally excluded from capitalistic engagement as ‘productive labour’.

Redistribution and technology adoption under uncertainty : a political economy perspective

We examine the role of politico-economic influences on macroeconomic performance within the framework of an endogenous growth model with costly technology adoption and uncertainty. The model is aimed at understanding the diversity in growth and inequality experiences across countries. Agents adopt either of two risky technologies, one of which is only available through financial intermediaries, who are able to alleviate some of this risk. The entry cost of financial intermediation depends on the proportion of government revenue that is allocated towards cost-reducing financial development expenditure, and agents vote on this proportion. The results show that agents at the top and bottom ends of the distribution prefer alternative means of re-distribution, thereby effectively blocking the allocation of resources towards cost-reducing financial development expenditure. Thus political factors have a role in delaying financial and capital deepening and economic development. Furthermore, the model provides a political-economy perspective on the Kuznets curve; uncertainty interacts with the political economy mechanism to produce transitional inequality patterns that, depending on initial conditions, can unearth the Kuznets-curve experience. Finally, the political outcomes are inefficient relative to policies aimed at maximizing the collective welfare of agents in the economy.

Essays in the political economy of voting and reforms

This thesis presents four essays in the political economy of elections and reforms. The first study exploits discontinuities around school entry cut-off dates to show that early childhood conditions can impact the probability to become a top-flight politician. The second study provides empirical estimates of the effect of sequential voting on turnout and bandwagon voting outside the laboratory. The third work describes a novel nonparametric strategy to identify tactical voting patterns directly from balloting results using British election data. Finally, a study is put forward that examines the political feasibility of reforms.

'Black international business': Critical issues and ethical dilemmas

In this chapter, we explore the 'darker' faces of international business (IB). Over a decade ago, Eden and Len way (2001) raised the need for examining both the 'bright' and the 'dark' side of globalization in order to achieve a better understanding of the concept and of its impact on IB activities. In doing this, they posited the multinational enterprise (MNE) as the 'key agent' and 'f.1ee' of globalization and discussed, primarily, the relationship between MNEs and nation-states as the central interf.1ce of its impact. Additionally, they posited that, by and large, the community of IB scholars positioned themselves at the bright end of the globalization spectrum, seeing it as essentially positive, whilst most non-governmental organizations (NGOs) and international political economy (IPE) academics set themselves at the dark end. Whilst they acknowledged their own 'bright side' tendencies, they called for a more nuanced consideration of MNEs as what they referred to as the Janus bee' of globalization.

The arobase in the libr@ry : new political economies of children’s literatures and literacies

This essay--part of a special issue on the work of Gunther Kress--uses the idea of affordances and constraints to explore the (im)possibilities of new environments for engaging with literature written for children (see Kress, 2003). In particular, it examines a festival of children's literature from an Australian education context that occurs online. The festival is part of a technologically mediated library space designated by the term libr@ry (Kapitzke & Bruce, 2006). The @ symbol (French word "arobase") inserted into the word library indicates that technological mediation has a history, an established set of social practices, and a political economy, which even chatrooms with "real" authors may alter but not fully supplant.

International Perspectives on the Creative Econmomy

This publication contains papers by leading international experts in creative industries theory, practice and methodology. The objective of this book is to provide a clear and detailed account of developments in the international creative economy, including specific media or cultural sectors, as well as commonalties among these sectors. The content and core themes are : The creative economy (definitions, issues, theory, and emerging perspectives); Methodology, including statistical analysis of selected cultural and media industry sectors globally; Innovation and creative industries policy, including cultural export strategy; and Regional and local perspectives (North America, Asia, Europe, Oceania)

Space and Cyberspace: on the enclosure of consciousness

In this chapter I argue that the global privatisation of elctromagnetic spectrum marks this period as historically unique. I also put forward conceptual categories for understanding the nature of an emergent cybereconomy. They correspond to classical conceptions of property, value and labour, but in no way treat these categories as singular, simple or unproblematic. From a perspective informed largely by Marx’s critique of classical political economy, I frame the creation of a global cyberspace as the enclosure, or “privatisation”, of conscious activity. I argue that a full and formally defined cyberspace, at least as it is currenty conceived of, must prefigure the eventual alienation of human social existence at its most fundamental and definitive level: consciousness.

Tax morale and direct democracy

This paper analyses the impact of direct democracy on tax morale in Switzerland, a country where participation rights strongly vary across different cantons, using survey data from the International Social Survey Programme (ISSP) 1998. The findings suggest that direct democratic rights have a significantly positive effect on tax morale.

The cultural economy moment?

This paper explores the rise of cultural economy as a key organising concept over the 2000s. While it has intellectual precursors in political economy, sociology and postmodernism, it has been work undertaken in the fields of cultural economic geography, creative industries, the culture of service industries and cultural policy where it has come to the forefront, particularly around whether we are now in a ‘creative economy’. While work undertaken in cultural studies has contributed to these developments, the development of neo-liberalism as a meta-concept in critical theory constitutes a substantive barrier to more sustained engagement between cultural studies and economics, as it rests upon a caricature of economic discourse. The paper draws upon Michel Foucault’s lectures on neo-liberalism to indicate that there are significant problems with the neo-Marxist account hat became hegemonic over the 2000s. The paper concludes by identifying areas such as the value of information, the value of networks, motivations for participation in online social networks, and the impact of business cycles on cultural sectors as areas of potentially fruitful inter-disciplinary engagement around the nature of cultural economy.

Adam Smith's dinner

In 1961, the East German government erected what they claimed was an anti-capitalist barricade. In 1989, this barricade was dismantled by those whom it was supposed to keep apart: the forces it was intended to contain had overwhelmed it. In the aftermath, the victims of Stalinist oppression and the planned economy opted for radical change. Some might have hoped that they would intellectually march resolutely westwards towards the forms of social democracy that had proven so successful in their nearest neighbours – Scandinavia, Germany and Austria – and stop when they had reached a point on the political spectrum with which they felt comfortable, and which worked for them. Unfortunately, they went to the opposite end of political economy. That choice was celebrated by those theorists who wanted our own countries to move in the same direction. Eastern Europe suffered a decline of 50% in its GDP. Much earlier in 1653, Peter Stuyvesant had erected an earth and wooden wall to protect the westernmost settlement of a great commercial nation from those they imagined to be barbarians. In 1699 Stuyvesant’s barrier was dismantled by the British, who replaced it with a street named after the wall. So it came to be that one of the most inconsequential walls in history became one of history’s most famous streets. I am not sure if the Dutch had left some tulip bulbs on either side of the wall, perhaps as a reminder of capitalism’s first bubble, and an inspiration to later bubbles. However, many of the victims of the latest burst bubble are pretty keen to tear down that Wall.1 As in 1989, they want to take action against the guardians of the system that failed them. And the more they suffer, the more likely it is that they will demand radical change, and the more likely that the resulting change will go too far – as seems to have been the case in Eastern Europe after the terminal crisis of communism, and in the majority of democracies that fell in the dozen years following the Great Crash. The current reaction is so strong that some are even wondering what role there will be for markets. I was invited to address a conference in the EU Parliament last November on the topic ‘Capitalism: Quo Vadis?’, where I apologized to the international audience that the topic was posed in a dead European language because the answer to this question is not going to be determined by the west alone. The problems we have been addressing emerged in the west and have affected the rest. However, the answers will not come, solely from the west, and may even come primarily from the south and the east.

Media as creative industries : conglomeration and globalization as accumulation strategies in an age of digital media

This chapter will begin by considering some of the distinctive features of media as creative industries, including their assessment of risk and return on investment, team-based production, the management of creativity, the value chain of production, distribution and circulation, and the significance of intellectual property in their revenue strategies. It will then critically appraise three strategies to capture new markets and revenue streams in the context of the rise of the Internet, digital media and globally networked distribution. The three strategies to be considered are conglomeration, networking and globalization, and the focus will be on the media giants such as News Corporation, Disney and Time-Warner. It will be argued that all three present considerable challenges in their application, and digital media technologies are weakening rather than strengthening their capacity to control the global media environment. The chapter will conclude with consideration of some implications of this analysis for questions of media power.