Does Fiscal Pressure Influence Shadow Economy? A Panel Data Analysis for the OECD Countries

This chapter targets the estimation of the impact of fiscal pressure upon tax frauds, through a linear and parametric approach on panel data as well. For this purpose, we use a sample consisting of 38 OECD countries for the period 2005–2020, which is divided into two subgroups of countries (old countries (old) and new ones (new)). Our results confirm the existence of the Laffer curve (having a U-shape) for the majority of our results, except for the social and security contributions for the all and old OECD samples, and direct taxes for the new OECD sample. Then, we find that the level of resilience of new OECD countries is below that of old OECD countries. In addition, the form of the relationship differs between old and new countries, while the highest disparity in the form of the relationship regarding shadow economy is found for direct taxes. All our results are interpreted in detail and their policy implications are discussed as well. The limits of this study leave avenue for future research in the field: different tax fraud proxies, supplementary control variables, other multivariate data techniques.