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Corporate tax evasion: The case for specialists

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  • Lipatov, Vilen

Abstract

We analyze the role of accounting specialists who help corporations evade/avoid taxes in a game of incomplete information played by a tax authority, corporate taxpayers, and an accounting specialist. In addition to a full equilibrium characterization, we establish that (i) marginal changes in enforcement are not effective when evasion/avoidance is pervasive; (ii) fines on firms as opposed to specialists are more effective in such situations; (iii) reducing auditing costs and increasing “creative accounting” costs are effective in curbing evasion when tax compliance is relatively high.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 81 (2012)
Issue (Month): 1 ()
Pages: 185-206

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Handle: RePEc:eee:jeborg:v:81:y:2012:i:1:p:185-206

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Tax evasion; Tax avoidance; Tax compliance; Sophisticated evasion;

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References

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  1. Klepper, Steven & Mazur, Mark & Nagin, Daniel, 1991. "Expert Intermediaries and Legal Compliance: The Case of Tax Preparers," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 205-29, April.
  2. Friedrich Schneider, 2006. "Shadow Economies and Corruption all over the World: What do we really Know?," CESifo Working Paper Series 1806, CESifo Group Munich.
  3. Martin Feldstein, 1995. "Tax Avoidance and the Deadweight Loss of the Income Tax," NBER Working Papers 5055, National Bureau of Economic Research, Inc.
  4. Damjanovic, Tatiana & Ulph, David, 2010. "Tax progressivity, income distribution and tax non-compliance," European Economic Review, Elsevier, vol. 54(4), pages 594-607, May.
  5. Joel Slemrod, 2004. "The Economics of Corporate Tax Selfishness," NBER Working Papers 10858, National Bureau of Economic Research, Inc.
  6. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610, Wisconsin Madison - Social Systems.
  7. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  8. Wojciech Kopczuk & Joel Slemrod, 2006. "Putting Firms into Optimal Tax Theory," American Economic Review, American Economic Association, vol. 96(2), pages 130-134, May.
  9. Reinganum, Jennifer F & Wilde, Louis L, 1986. "Equilibrium Verification and Reporting Policies in a Model of Tax Compliance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 739-60, October.
  10. Keith J. Crocker & Joel Slemrod, 2004. "Corporate Tax Evasion with Agency Costs," NBER Working Papers 10690, National Bureau of Economic Research, Inc.
  11. Joel Slemrod & John D. Wilson, 2006. "Tax Competition With Parasitic Tax Havens," NBER Working Papers 12225, National Bureau of Economic Research, Inc.
  12. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers 00/26, International Monetary Fund.
  13. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
  14. Reinganum, Jennifer F. & Wilde, Louis L., 1990. "Equilibrium Enforcement and Compliance in the Presence of Tax Practitioners," Working Papers 744, California Institute of Technology, Division of the Humanities and Social Sciences.
  15. Kong-Pin & C.Y. Cyrus Chu, 2005. "Internal Control versus External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 151-164, Spring.
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Citations

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Cited by:
  1. Lipatov, Vilen, 2006. "Tax Evasion and Coordination," MPRA Paper 1251, University Library of Munich, Germany, revised Dec 2006.
  2. Carlo Fiorio & Stefano Iacus & Alessandro Santoro, 2013. "Taxpaying response of small firms to an increased probability of audit: some evidence from Italy," Working Papers 251, University of Milano-Bicocca, Department of Economics, revised Jul 2013.
  3. Vilen Lipatov, 2014. "Compliance Dynamics Generated by Social Interaction Rules," CESifo Working Paper Series 4767, CESifo Group Munich.

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