Imperfect Detection of Tax Evasion in a Corrupt Tax Administration
AbstractThis article models the imperfect detection of tax evasion motivated by the existence of a corrupt tax administration. Consistent with previous literature, fines and audit probabilities both have a positive effect on compliance. Moreover, the model shows that they have a negative effect on the bribes paid to corrupt tax officials. More corruption decreases compliance levels, giving honest auditors incentives to work harder to detect evasion. Giving inspectors a share of the detected evasion (tax farming) makes auditors work harder; however, increasing their wages reduces their exerted effort to discover evasion. Higher compliance can as well be achieved by hiring more efficient inspectors.
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 University Library of Munich, Germany in its series MPRA Paper with number 39198.
Date of creation: 27 Jul 2011
Date of revision:
Taxation; Evasion; Corruption;
Other versions of this item:
- Diego Escobari, 2012. "Imperfect Detection of Tax Evasion in a Corrupt Tax Administration," Public Organization Review, Springer, Springer, vol. 12(4), pages 317-330, December.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-06-13 (Accounting & Auditing)
- NEP-ALL-2012-06-13 (All new papers)
- NEP-IUE-2012-06-13 (Informal & Underground Economics)
- NEP-PBE-2012-06-13 (Public Economics)
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.:
- Hindriks, J. & Keen, M. & Muthoo, A., 1998.
"Corruption, Extortion and Evasion,"
Discussion Papers, Exeter University, Department of Economics
9809, Exeter University, Department of Economics.
- HINDRIKS, Jean & KEEN, Michael & MUTHOO, Abhinay, . "Corruption, extortion and evasion," CORE Discussion Papers RP, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1671, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Hindriks, J. & Keen, M. & Muthoo, A., 1996. "Corruption, Extortion and Evasion," Papers, Notre-Dame de la Paix, Sciences Economiques et Sociales 179, Notre-Dame de la Paix, Sciences Economiques et Sociales.
- Jean Hindriks, Michael Keen and Abhinay Muthoo, . "Corruption, Extortion and Evasion," Economics Discussion Papers, University of Essex, Department of Economics 470, University of Essex, Department of Economics.
- James Andreoni & Brian Erard & Jonathan Feinstein, 1998.
Journal of Economic Literature, American Economic Association,
American Economic Association, vol. 36(2), pages 818-860, June.
- Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers, Wisconsin Madison - Social Systems 9610, Wisconsin Madison - Social Systems.
- Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers, Wisconsin Madison - Social Systems 9610r, Wisconsin Madison - Social Systems.
- Wane, Waly, 2000. "Tax evasion, corruption, and the remuneration of heterogeneous inspectors," Policy Research Working Paper Series, The World Bank 2394, The World Bank.
- Volodymyr Bilotkach, 2006. "A Tax Evasion - Bribery Game: Experimental Evidence from Ukraine," European Journal of Comparative Economics, Cattaneo University (LIUC), Cattaneo University (LIUC), vol. 3(1), pages 31-49, June.
- Lee, Kangoh, 2001. "Tax evasion and self-insurance," Journal of Public Economics, Elsevier, Elsevier, vol. 81(1), pages 73-81, July.
- Laszlo Goerke, 2008.
"Bureaucratic corruption and profit tax evasion,"
Economics of Governance, Springer,
Springer, vol. 9(2), pages 177-196, May.
- Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 3(2), pages 201-202, May.
- Vito Tanzi & Hamid Reza Davoodi, 2000. "Corruption, Growth, and Public Finances," IMF Working Papers, International Monetary Fund 00/182, International Monetary Fund.
- Bernasconi, Michele, 1998. "Tax evasion and orders of risk aversion," Journal of Public Economics, Elsevier, Elsevier, vol. 67(1), pages 123-134, January.
- Camerer, Colin F & Ho, Teck-Hua, 1994. "Violations of the Betweenness Axiom and Nonlinearity in Probability," Journal of Risk and Uncertainty, Springer, Springer, vol. 8(2), pages 167-96, March.
- Chander, Parkash & Wilde, Louis, 1992. "Corruption in tax administration," Journal of Public Economics, Elsevier, Elsevier, vol. 49(3), pages 333-349, December.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 1(3-4), pages 323-338, November.
- Antonio Acconcia & Marcello D'Amato & Riccardo Martina, 2003. "Tax Evasion and Corruption in Tax Administration," Public Economics, EconWPA 0310001, EconWPA.
- Jain, Arvind K, 2001. " Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 15(1), pages 71-121, February.
- Jaanika Meriküll & Tairi Rõõm & Karsten Staehr, 2013. "Perceptions of unreported economic activities in Baltic Firms. Individualistic and non-individualistic motives," Bank of Estonia Working Papers, Bank of Estonia wp2012-8, Bank of Estonia, revised 04 Feb 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.