Corruption, Harassment and Evasion in Tax Collection
AbstractThe phenomenon of tax evasion is a universal problem especially prevalent in transition economies. What is the compliance/evasion decision of the taxpayers in presence of corruptible inspector and revenue maximizing government? How does a corrupt regime affect the task of tax collection? What is the optimal audit scheme for the government? This paper studies the strategic interaction between taxpayer and inspector in a sequential game theoretic framework and finds that despite inspection there can be suboptimal collection of taxes in a corrupt regime because of harassment, bribery and the possibility of collusion between the inspector and the taxpayer. In a corrupt regime the cost of corruption has a regressive bias. Also, it is interesting to note that under such a setup the proportional evasion performed by the poorer section is more than that of the richer section.
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Bibliographic InfoArticle provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.
Volume (Year): 43 (2008)
Issue (Month): 1 (July)
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Find related papers by JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
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