Economics Laffer Curve Questions
Tax evasion has a negative impact on the Laffer Curve. When individuals or businesses engage in tax evasion, they are able to avoid paying their fair share of taxes. This reduces the overall revenue collected by the government, potentially leading to a shift in the Laffer Curve. As tax evasion increases, the government may need to raise tax rates to compensate for the lost revenue, which can result in a decrease in economic activity and a potential decrease in tax revenue. Therefore, tax evasion can distort the relationship between tax rates and tax revenue depicted by the Laffer Curve.