Finding Out Who The Crooks Are — Tax Evasion With Sequential Auditing
AbstractThis paper investigates multi-item moral hazard with auditing contests.s Although the presented model is widely applicable, we choose tax evasion as an exemplary application. We introduce a tax-evasion model where tax authority and taxpayer invest in detection and concealment. The taxpayers have multiple potential income sources and are heterogeneous with respect to their evasion scruples. The tax authority — unable to commit to an audit strategy — observes a tax declaration and chooses its auditing efforts. We show that the tax authority prefers to audit source by source until it finds evidence for evasion to conduct a full-scale audit thereafter. Furthermore, we provide an explanation for why economic actors engage in both the formal and informal sector at the same time.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal The Singapore Economic Review.
Volume (Year): 51 (2006)
Issue (Month): 02 ()
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Web page: http://www.worldscinet.com/ser/ser.shtml
Other versions of this item:
- Ralph-C Bayer, 2004. "Finding Out Who the Crooks Are - Tax Evasion with Sequential Auditing," School of Economics Working Papers 2004-10, University of Adelaide, School of Economics.
- Ralph-C Bayer, 2003. "Finding out Who the Crooks Are Â– Tax Evasion with Sequential Auditing," School of Economics Working Papers 2003-07, University of Adelaide, School of Economics.
- Ralph C Bayer, 2004. "Finding out who the crooks are - Tax evasion with sequential auditing," Public Economics 0412009, EconWPA.
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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