Tax evasion, information reporting, and the regressive bias hypothesis
AbstractA robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in e¤ective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency�s use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 28406.
Date of creation: 26 Jan 2011
Date of revision:
tax evasion; tax enforcement; information reporting; auditing;
Other versions of this item:
- Simon Halphen Boserup & Jori Veng Pinje, 2010. "Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis," EPRU Working Paper Series 2010-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- 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
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ACC-2011-02-05 (Accounting & Auditing)
- NEP-ALL-2011-02-05 (All new papers)
- NEP-PUB-2011-02-05 (Public Finance)
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