The rich are more likely to be tax cheats

A new US study shows the rich are more likely to hide their true income levels when declaring taxes.

A new US study shows the rich are more likely to hide their true income levels when declaring taxes.

The study, authored by Joel Slemrod, economics professor and tax policy research director at the University of Michigan, reveals those earning between $500,000 and $1 million understated their adjusted gross income by 21% in 2001.

This is compared to an under-reporting rate of 8% for those earning between $50,000 and $100,000. Those earning more than $200,000 made up 25% of all incomes, but account for 40% of under-reported income.

Surprisingly, those earning more than $2 million have an 11% under-reporting rate. But Slemrod says that isn’t necessarily a good thing, noting the uber-wealthy may use sophisticated tax-evasion techniques that are hard to detect.

“I just don’t know whether these audits were able to track down really sophisticated non-compliance or Swiss bank accounts. They may underestimate it (non-compliance) at the top,” he told Forbes.

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