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Who participates in tax amnesties? Self-selection of risk-averse taxpayers

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Author Info
Marchese, Carla ()
Privileggi, Fabio ()

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Abstract

In this paper we model taxpayer participation in an unanticipated tax amnesty which can be entered by paying a fixed amount. Taxpayers are characterized by a Constant Relative Risk Aversion (CRRA) utility function and differ in relative risk aversion coefficient and in income. With minor changes the same model also describes a FATOTA (Fixed Amount of Taxes or Tax Audit) system. Our results show that amnesties may fail as a self-selective device to fully separate large-scale from small-scale tax evaders and to extract resources from the former. Only taxpayers whose relative risk aversion falls within a given interval participate, while those whose evasion is too small or too large do not enter. The model is used to estimate relative risk aversion and tax evasion of participants in the 1991 and 1994 Italian income tax amnesties.

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File URL: http://polis.unipmn.it/pubbl/RePEc/uca/ucapdv/marchese_privileggi.pdf
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Publisher Info
Paper provided by Department of Public Policy and Public Choice - POLIS in its series P.O.L.I.S. department's Working Papers with number 21.

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Length: 38 pages
Date of creation: Oct 2001
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Handle: RePEc:uca:ucapdv:21

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Web page: http://polis.unipmn.it/index.html

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Related research
Keywords: tax amnesty tax evasion relative risk aversion self-selection

Other versions of this item:

Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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References listed on IDEAS
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.:
  1. Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics. [Downloadable!]
    Other versions:
  2. Pestieau, Pierre & Possen, Uri M. & Slutsky, Steven M., 1998. "The value of explicit randomization in the tax code," Journal of Public Economics, Elsevier, vol. 67(1), pages 87-103, January. [Downloadable!] (restricted)
  3. Dagobert L. Brito & Jonathan H. Hamilton & Steven M. Slutsky & Joseph E. Stiglitz, 1995. "Randomization in Optimal Income Tax Schedules," NBER Working Papers 3289, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Chu, C. Y. Cyrus, 1990. "Plea bargaining with the irs," Journal of Public Economics, Elsevier, vol. 41(3), pages 319-333, April. [Downloadable!] (restricted)
  5. Grossman, Gene M & Katz, Michael L, 1983. "Plea Bargaining and Social Welfare," American Economic Review, American Economic Association, vol. 73(4), pages 749-57, September. [Downloadable!] (restricted)
  6. Marchese, Carla & Privileggi, Fabio, 1999. "Taxpayers Attitudes Toward Risk and Amnesty Participation: Economic Analysis and Evidence for the Italian Case," P.O.L.I.S. department's Working Papers 6, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  7. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May. [Downloadable!] (restricted)
  8. Carla Marchese & Alberto Cassone, 2000. "Tax Amnesty as Price-Discriminating Behavior by a Monopolistic Government," European Journal of Law and Economics, Springer, vol. 9(1), pages 21-32, January. [Downloadable!] (restricted)
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  1. Julio López Laborda & Fernando Rodrigo Sauco, 2002. "El análisis económico de las amnistías fiscales: ¿Qué hemos aprendido hasta ahora?," Hacienda Pública Española, IEF, vol. 163(4), pages 121-153, December. [Downloadable!]
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