The authors study an income tax enforcement problem using a principal-agent model where the government sets the tax and inspection functions. These are announced to the agents and there is no commitment problem. The penalty function for dishonest taxpayers is given exogenously and satisfies certain social norms. The authors prove that, for a large family of penalty functions, this policy is such that honesty implies regressiveness. This result does not depend on the fact that agents know the true probability of inspection. Copyright 1997 by The editors of the Scandinavian Journal of Economics.
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Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2000.
"Tax Evasion and Trust,"
Discussion Papers
dp00-05, Department of Economics, Simon Fraser University, revised Feb 2000.
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