Corruption and Tax Evasion with Competitive Bribes
AbstractIn this paper we consider a simple economy where self interested taxpayers may have incentives to evade taxes and to escape sanctions, by bribing public officials in charge for tax collection. The level of monitoring and the level of corruption are endogenously determined assuming that the price for corruption (bribe) sets at a value where expected rents in the public sector are completely dissipated in monitoring costs due to competition among public officials. In the proposed framework, larger fines for evasion will increase tax compliance with ambiguous effects on corruption while larger fine for corruption reduce corruption at the cost of reducing tax compliance. Interestingly, a utilitarian legislator will want to set maximal penalties. Intuitively, preventing corruption through fines is valuable to the planner since it reduces the amount of rent dissipation in the public sector at the cost of decreasing deterrence for the underlying offence (evasion). Finally the shadow value of deterrence is such that the level of public good provided in the economy is smaller than its first best.
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 Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 112.
Date of creation: 21 Dec 2003
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-08 (All new papers)
- NEP-MAC-2004-01-08 (Macroeconomics)
- NEP-POL-2004-01-08 (Positive Political Economics)
- NEP-PUB-2004-01-08 (Public Finance)
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.:
- Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
- Bar-Gill, Oren & Harel, Alon, 2001.
"Crime Rates and Expected Sanctions: The Economics of Deterrence Revisited,"
The Journal of Legal Studies,
University of Chicago Press, vol. 30(2), pages 485-501, Part I Ju.
- Bar-Gill, O. & Harel, A., 2000. "Crime Rates and Expected Sanctions: The Economics of Deterrence Revisited," Papers 00-14, Tel Aviv.
- Bar-Gill, O. & Harel, A., 2000. "Crime Rates and Expected Sanctions: The Economics of Deterrence Revisited," Papers 2000-14, Tel Aviv.
- James Andreoni & Brian Erard & Jonathan Feinstein, 1998.
Journal of Economic Literature,
American Economic Association, vol. 36(2), pages 818-860, June.
- Mookherjee, Dilip & Png, I P L, 1992. "Monitoring vis-a-vis Investigation in Enforcement of Law," American Economic Review, American Economic Association, vol. 82(3), pages 556-65, June.
- Polinsky, A. Mitchell & Shavell, Steven, 2001.
"Corruption and optimal law enforcement,"
Journal of Public Economics,
Elsevier, vol. 81(1), pages 1-24, July.
- Chander, Parkash & Wilde, Louis, 1992. "Corruption in tax administration," Journal of Public Economics, Elsevier, vol. 49(3), pages 333-349, December.
- Ira N. Gang & Amal Sanyal & Omkar Goswami, 1998.
"Corruption, Tax Evasion and the Laffer Curve,"
Departmental Working Papers
199604, Rutgers University, Department of Economics.
- 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.
- Hindriks, J. & Keen, M. & Muthoo, A., 1998.
"Corruption, Extortion and Evasion,"
9809, Exeter University, Department of Economics.
- HINDRIKS, Jean & KEEN, Michael & MUTHOO, Abhinay, . "Corruption, extortion and evasion," CORE Discussion Papers RP -1671, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Hindriks, J. & Keen, M. & Muthoo, A., 1996. "Corruption, Extortion and Evasion," Papers 179, Notre-Dame de la Paix, Sciences Economiques et Sociales.
- Jean Hindriks, Michael Keen and Abhinay Muthoo, . "Corruption, Extortion and Evasion," Economics Discussion Papers 470, University of Essex, Department of Economics.
- Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-95, September.
- George J. Stigler, 1974.
"The Optimum Enforcement of Laws,"
in: Essays in the Economics of Crime and Punishment, pages 55-67
National Bureau of Economic Research, Inc.
- repec:att:wimass:8908 is not listed on IDEAS
- Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
- Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
- James Andreoni, 1991.
"Reasonable Doubt and the Optimal Magnitude of Fines: Should the Penalty Fit the Crime?,"
RAND Journal of Economics,
The RAND Corporation, vol. 22(3), pages 385-395, Autumn.
- Saha, Atanu & Poole, Graham, 2000. "The economics of crime and punishment: An analysis of optimal penalty," Economics Letters, Elsevier, vol. 68(2), pages 191-196, August.
- Isaac Ehrlich, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter.
- Steven Shavell & A. Mitchell Polinsky, 2000.
"The Economic Theory of Public Enforcement of Law,"
Journal of Economic Literature,
American Economic Association, vol. 38(1), pages 45-76, March.
- Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
- Djumashev, Ratbek, 2006. "Corrupt Bureaucracy and Growth," MPRA Paper 2082, University Library of Munich, Germany.
- Antonio Acconcia, 2006. "Endogenous Corruption and Tax Evasion in a Dynamic Model," CSEF Working Papers 154, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006.
- Anwar Shah, 2014. "Decentralized Provision of Public Infrastructure and Corruption," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1418, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Shah, Anwar, 2006. "Corruption and decentralized public governance," Policy Research Working Paper Series 3824, The World Bank.
- Ratbek Dzhumashev, 2006. "Public Goods, Corruption And Growth???," Development Research Unit Working Paper Series 15/06, Monash University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio).
If references are entirely missing, you can add them using this form.