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Optimal inspection policy and income-tax compliance

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Author Info
Inés Macho Stadler () (Universidad Autonóma de Barcelona)
David Perez-Castrillo () (Universidad Autónoma de Barcelona)

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Abstract

In this paper, we present a review of the literature on optimal auditing of tax evasion and we fill some existing gaps with new results. The main contribution is to give a unified vision on the optimal audit policy when the Agency can pool the taxpayers as a function of the main activity they obtain the income from (because it determines their income distribution and their possibilities to evade), or as result of some additional information about them. We also study the consequences of the existence of a group of taxpayers who are characteristic since they are always honest.

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File URL: http://www.ief.es/Publicaciones/Revistas/Hacienda%20Publica/173_PolInspec.pdf
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Publisher Info
Article provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.

Volume (Year): 173 (2005)
Issue (Month): 2 (June)
Pages: 9-45
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:hpe:journl:y:2005:v:173:i:2:p:9-45

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Related research
Keywords: Tax evasion; optimal audit policy.;

Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

References listed on IDEAS
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  1. Alm, James & Bahl, Roy & Murray, Matthew N, 1990. "Tax Structure and Tax Compliance," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 603-13, November. [Downloadable!] (restricted)
  2. Franckx, Laurent, 2002. "The Use of Ambient Inspections in Environmental Monitoring and Enforcement When the Inspection Agency Cannot Commit Itself to Announced Inspection Probabilities," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 71-92, January. [Downloadable!] (restricted)
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    Other versions:
  6. Sanchez, Isabel & Sobel, Joel, 1993. "Hierarchical design and enforcement of income tax policies," Journal of Public Economics, Elsevier, vol. 50(3), pages 345-369, March. [Downloadable!] (restricted)
    Other versions:
  7. Macho-Stadler, Ines & Perez-Castrillo, J David, 1997. "Optimal Auditing with Heterogeneous Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 951-68, November.
  8. Perez-Castrillo, David & Riedinger, Nicolas, 2004. "Auditing cost overrun claims," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 267-285, June. [Downloadable!] (restricted)
    Other versions:
  9. Panayiota Lyssiotou & Panos Pashardes & Thanasis Stengos, 2004. "Estimates of the black economy based on consumer demand approaches," Economic Journal, Royal Economic Society, vol. 114(497), pages 622-640, 07. [Downloadable!] (restricted)
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    Other versions:
  12. Inés Macho-Stadler & David Pérez-Castrillo, 2004. "Optimal Enforcement Policy and Firms' Emissions and Compliance with Environmental Taxes," UFAE and IAE Working Papers 612.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  13. Luigi Alberto Franzoni, 2004. "Discretion in Tax Enforcement," Economica, London School of Economics and Political Science, vol. 71(283), pages 369-389, 08. [Downloadable!] (restricted)
  14. Joel S. Demski & David E.M. Sappington, 1987. "Hierarchical Regulatory Control," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 369-383, Autumn. [Downloadable!] (restricted)
  15. Brian Erard & Jonathan S. Feinstein, 1994. "Honesty and Evasion in the Tax Compliance Game," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 1-19, Spring. [Downloadable!] (restricted)
    Other versions:
  16. Chu, C. Y. Cyrus, 1990. "Plea bargaining with the irs," Journal of Public Economics, Elsevier, vol. 41(3), pages 319-333, April. [Downloadable!] (restricted)
  17. Inés Macho-Stadler & David Pérez-Castrillo, 2001. "Settlement in Tax Evasion Prosecution," UFAE and IAE Working Papers 495.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  18. Sheffrin, S.M. & Triest, R.K., 1991. "Can Brute Deterrence Backfire? Perceptions and Attitudes in Taxpayer Compliance," Papers 373, California Davis - Institute of Governmental Affairs.
  19. Macho-Stadler, Ines & Perez-Castrillo, J David, 2002. "Auditing with Signals," Economica, London School of Economics and Political Science, vol. 69(273), pages 1-20, February. [Downloadable!] (restricted)
    Other versions:
  20. Scotchmer, Suzanne, 1992. "The Regressive Bias in Tax Enforcement," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 366-71.
  21. Border, Kim C & Sobel, Joel, 1987. "Samurai Accountant: A Theory of Auditing and Plunder," Review of Economic Studies, Blackwell Publishing, vol. 54(4), pages 525-40, October. [Downloadable!] (restricted)
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