Tax Uncertainty and Welfare-Improving Tax Disputes
CESifo, Munich, 2023
CESifo Working Paper No. 10392
![](https://cesifo.org/DocImg/cesifo1_wp10392.jpg?c=1689236836)
Tax law is often uncertain. In particular, the use of tax shelters tends to be in the “grey area” between illegal tax evasion and legal tax avoidance. In this paper I show that uncertainty in tax law can help achieve higher efficiency than allowing or disallowing a tax shelter with certainty. Furthermore, a tax dispute can lead to a net welfare gain despite the litigation costs. Thus, tax uncertainty and tax disputes can be socially desirable.
Public Finance