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Misreporting, retroactive audit and redistribution

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  • Sandrine Spaeter
  • Marc Willinger

Abstract

In this paper, we investigate an audit policy that allows a regulator to control past declarations of an agent who is caught to fraud in the current period or to adopt an action that is not desirable for Society. Coupled with redistribution effects due to the production of a public good, we show that retroactivity has not always the desired effect on the level of evasion or the level of effort, once the agent has decided to deviate from a given objective. Nevertheless, we derive conditions under which retroactivity lessens fraudulent behaviors, in quantity and in value. As a related result, authorities should communicate about how they use the individual contributions but information should not be completely transparent in order to fight efficiently against deviation. Redistribution and retroactivity may have opposite effects on the behavior of the agent when combined together.

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Bibliographic Info

Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2006-30.

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Date of creation: 2006
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Handle: RePEc:ulp:sbbeta:2006-30

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Keywords: moral hazard; retroactive audit; redistribution; public good; fraud.;

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  1. Greenberg, Joseph, 1984. "Avoiding tax avoidance: A (repeated) game-theoretic approach," Journal of Economic Theory, Elsevier, vol. 32(1), pages 1-13, February.
  2. Jung, Young H. & Snow, Arthur & Trandel, Gregory A., 1994. "Tax evasion and the size of the underground economy," Journal of Public Economics, Elsevier, vol. 54(3), pages 391-402, July.
  3. Mookherjee, Dilip & Png, I P L, 1990. "Enforcement Costs and the Optimal Progressivity of Income Taxes," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 410-31, Fall.
  4. Rickard, J A & Russell, A M & Howroyd, T D, 1982. "A Tax Evasion Model with Allowance for Retroactive Penalties," The Economic Record, The Economic Society of Australia, vol. 58(163), pages 379-85, December.
  5. Simon, Leo K. & Thoyer, Sophie & Morardet, Sylvie & Goodhue, Rachael E. & Rio, Patrick & Rausser, Gordon C., 2003. "Structure and bargaining power in multilateral negotiations: Application to water management policies in France," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58258, Australian Agricultural and Resource Economics Society.
  6. Alm, James & Jackson, Betty & McKee, Michael J., 1992. "Estimating the Determinants of Taxpayer Compliance with Experimental Data," National Tax Journal, National Tax Association, vol. 45(1), pages 107-14, March.
  7. 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.
  8. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October.
  9. Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
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Cited by:
  1. Sofia Pessoa e Costa & Stéphane Robin, 2007. "The Impact Of Training Programmes On Wages In France: An Evaluation Of The “Qualifying Contract” Using Propensity Scores," Working Papers of BETA 2007-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  2. Meixing DAI & Moïse SIDIROPOULOS & Eleftherios SPYROMITROS, 2007. "La transparence de la politique monétaire et la dynamique des marchés financiers," Working Papers of BETA 2007-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Théophile Azomahou & Tapas Mishra, 2006. "Age Dynamics and Economic Growth: Revisiting the Nexus in a Nonparametric Setting," Working Papers of BETA 2006-36, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  4. Meixing DAI, 2007. "A two-pillar strategy to keep inflation expectations at bay: A basic theoretical framework," Working Papers of BETA 2007-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  6. Estelle Dhont-Peltrault & Etienne Pfister, 2007. "R&D cooperation versus R&D subcontracting: empirical evidence from French survey data," Working Papers of BETA 2007-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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