Income tax evasion is a significant problem faced by most of the countries around the world. The phenomenon interferes with economic efficiency, socially desirable income distribution, long term economic growth, and price stability. Therefore, a reform strategy to increase tax compliance with a concerted, long term, coordinated, and comprehensive plan is required. It is also vital that tax administrators ensure that every compliance policy instrument at their disposal is use as effectively as possible. The intent of this study was to consider the implications of the increase of tax evasion which has been a source of big concern to policymakers. Issues, such as tax compliance costs and revenue maximizing taxation have also been analyzed. This paper pulls together the various strains of research to illustrate the current state of knowledge regarding the impacts of tax evasion on the economy and to identify areas in which additional research is particularly warranted.
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