Auditing with Signals
AbstractThis paper is a first step in analysing the use of statistical information about taxpayers' incomes by tax audit authorities. In a very simple model, we consider the design of the audit strategy when the tax authority can commit to it and has free access to a signal correlated with the taxpayer's true income. We discuss the optimal enforcement policy and compare it with the optimal one when only self-reported income is considered. Our main result postulates that the well-known regressive bias of revenue-maximizing audit rules may be reversed into a progressive one when signals are used. Copyright 2002 by The London School of Economics and Political Science
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 69 (2002)
Issue (Month): 273 (February)
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Other versions of this item:
- Inés Macho-Stadler & David Pérez-Castrillo, 1999. "Auditing with Signals," CIE Discussion Papers 1999-08, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Ines Macho-Stadler & David Perez-Castrillo, 2000. "Auditing with Signals," Econometric Society World Congress 2000 Contributed Papers 0660, Econometric Society.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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