The Runaway Taxpayer or: Is Prior Tax Notice Effective against Scofflaws?
AbstractIn this paper we study how prior tax notice (following audit and detection of tax fraud by Tax Authorities) affects individual behaviour in terms of tax compliance. We start with a very stylised theoretical framework, considering a situation in which an individual has been already audited and caught as tax evader, and knows that the Tax Authorities are looking for her to cash the due amount of taxes. We concentrate on the decision to move in order to avoid paying the bill, and derive the optimal number of times an individual should move equalising marginal costs and benefits of the decision. We then carry out an empirical analysis based on real data provided by an Italian collection agency for the period 2004-2007. Our results show that previous notice reduces the probability to move, but its cost is not large enough to correct the individual incentive to escape Tax Authorities.
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Bibliographic InfoPaper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 1.
Length: 39 pages
Date of creation: May 2008
Date of revision:
tax-enforcement; individual compliance decisions; prior notice;
Find related papers by JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ACC-2008-10-21 (Accounting & Auditing)
- NEP-ALL-2008-10-21 (All new papers)
- NEP-LAW-2008-10-21 (Law & Economics)
- NEP-PBE-2008-10-21 (Public Economics)
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