CORRUPTION, TAX EVASION AND ECONOMIC DEVELOPMENT IN ECONOMIES WITH HIERARCHIAL TAX ADMINISTRATIVE SYSTEM

Abstract

The paper looks into joint determination of corruption and development where there is hierarchial bureaucratic setup; tier one-bureaucrat and tier two bureaucrats. Corruption happens at two level once when tier one bureaucrat collude with households for tax evasion and another when tier one and tier two bureaucrats collude to hide corruption.. The paper determines that at high level of corruption, there is low development and at low incidence of corruption, there is high development.