TAX AMNESTIES AS ASSET-LAUNDERING DEVICES

This article analyzes the effect of a one-time tax amnesty intended to induce private citizens to voluntarily declare black assets accumulat ed from past tax evasion. in a dynamic setting, we find that such an a mnesty tends to enhance voluntary taxpayer compliance and reduce the s ize of the underground economy. However, it also generally lends to re duce aggregate net revenues collected by the government in the long nm , provided black assets command a higher pretax rate or return than wh ite assets. This is due to a post-amnesty reduction in involuntary rev enue collections that outweighs direct amnesty receipts and the increa se in voluntary compliance. The desirability of such amnesties thus de pends on the importance of unearthing black assets per se, relative to increasing revenue collections.