Audit, tax compliance and undeclared work: an empirical analysis
AbstractTo encourage tax compliance towards the Italian tax contributive system, the Italian Social Security Institute (INPS) develops a number of audits intothe Italian firms. The aim of these inspections is to detect possible evasions and to threaten cheating enterpreneurs with penalties, if necessary. In our case "to cheat" means to hide a part of the labor forces to the authority, underdeclaring their real dimensions and thus to evade a certain amount of social-insurance taxes. In this paper we particularly focus on showing how it is possible to use individual audit data to better understand the relation between inspections and tax compliance, and consequently the relation between the policy of auditing and undeclared work. A new source of data was built for this purpose, merging information about firms with individual audit data. Our analysis is developed as follow: after a brief introduction, we describe the dataset and we give some details on the procedures used by inspectors. Then we show a simple model of auditing in order to enlighten relation between audit policy and work force declaration. The second part of the analisys, mainly empirical, attempts to explain how to estimate undeclared work starting from our new source of data, after that, we assess two microeconometric policy evaluation analysis. Our aim is to nderstand the relation that lies between the policy of auditing and a) the propensity to declare workers; b) the number of black workers implied in the labour market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 94.
Date of creation: 2009
Date of revision:
Audit; undeclared work; sample selection; microdata.;
Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arthur Snow & Ronald S. Warren Jr., 2007. "Audit Uncertainty, Bayesian Updating, and Tax Evasion," Public Finance Review, , vol. 35(5), pages 555-571, September.
- David Aristei & Luca Pieroni, 2008.
"A double-hurdle approach to modelling tobacco consumption in Italy,"
Taylor & Francis Journals, vol. 40(19), pages 2463-2476.
- David Aristei & Luca Pieroni, 2007. "A Double-Hurdle Approach to Modelling Tobacco Consumption in Italy," Quaderni del Dipartimento di Economia, Finanza e Statistica 29/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
- Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, vol. 33(3), pages 341-365, December.
- Suzanne Scotchmer & Joel Slemrod, 1988.
"Randomness in Tax Enforcement,"
NBER Working Papers
2512, National Bureau of Economic Research, Inc.
- Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
- Miles S. Kimball, 1989.
"Precautionary Saving in the Small and in the Large,"
NBER Working Papers
2848, National Bureau of Economic Research, Inc.
- Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
- Allen McDowell, 2003. "From the help desk: hurdle models," Stata Journal, StataCorp LP, vol. 3(2), pages 178-184, June.
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
- Segal, Uzi & Spivak, Avia, 1990.
"First order versus second order risk aversion,"
Journal of Economic Theory,
Elsevier, vol. 51(1), pages 111-125, June.
- Menezes, C & Geiss, C & Tressler, J, 1980. "Increasing Downside Risk," American Economic Review, American Economic Association, vol. 70(5), pages 921-32, December.
- Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
- Snow, Arthur & Warren, Ronald Jr., 2005. "Tax evasion under random audits with uncertain detection," Economics Letters, Elsevier, vol. 88(1), pages 97-100, July.
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
- Blundell, Richard & Meghir, Costas, 1987. "Bivariate alternatives to the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 179-200.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Giovanni Bert).
If references are entirely missing, you can add them using this form.