Income Tax Evasion and the Penalty Structure
AbstractIn the Allingham-Sandmo (AS) model of tax evasion, fines are paid on evaded income, whereas in the Yitzhaki (Y) model fines are levied on evaded tax. This note compares the two models. In the Y model, evasion is higher and tax revenue lower than in the AS model. If government seeks to maximize expected tax revenue, it would prefer penalties of the AS type if it maximizes expected voter welfare, it should choose Y type penalties. A voting model to determine the penalty structure is also considered.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 8 (2004)
Issue (Month): 5 ()
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Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- D7 - Microeconomics - - Analysis of Collective Decision-Making
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Discussion Papers of DIW Berlin
297, DIW Berlin, German Institute for Economic Research.
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