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 accumulated from past tax evasion. in a dynamic setting, we find that such an amnesty tends to enhance voluntary taxpayer compliance and reduce the size of the underground economy. However, it also generally lends to reduce aggregate net revenues collected by the government in the long nm, provided black assets command a higher pretax rate or return than white assets. This is due to a post-amnesty reduction in involuntary revenue collections that outweighs direct amnesty receipts and the increase in voluntary compliance. The desirability of such amnesties thus depends on the importance of unearthing black assets per se, relative to increasing revenue collections.