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Hauck, Tobias and Wallossek, Luisa (1. September 2021): Optional (Non-)Filing and Effective Taxation. Discussion Papers in Economics 2021 [PDF, 3MB]

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Tax non-filing is legal in more than thirty countries worldwide. Using German administrative tax data, we examine the effect of such optional (non-)filing systems: Low-income taxpayers are both more likely not to file and to over-remit taxes, aggregating to total over-remittances of 950 millione in 2014. Because low-income non-filers face higher effective average tax rates, this reduces the effective tax progressivity. Non-filing also increases effective marginal tax rates which imposes distortionary effects for non-filers with no mechanical tax revenue gain from other taxpayers, leading to unexploited tax revenue potential. We suggest two reform proposals to quantify this potential.

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