IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v3y2001i2p225-33.html
   My bibliography  Save this article

Revenge, Tax Informing, and the Optimal Bounty

Author

Listed:
  • Yaniv, Gideon

Abstract

A common belief is that the IRS pays tax informants 10% of whatever their tips produce in revenue. Actually, the bounty rate is even lower, averaging, in recent years, less than 2% of the amount of taxes and fines recovered. Why is it that the IRS is so tightfisted in rewarding informants who help recover taxes that otherwise would not have been recovered? The present paper approaches this question from an economic perspective, introducing a simple model of the informing decision, the implications of which are incorporated into the tax administration's problem of selecting a bounty rate, as well as a probability of convicting informed-upon evaders, that maximize its expected net revenues from tax informing. The paper shows that a revenue-maximizing tax administration would set its bounty rate lower and its prosecution efforts higher, the stronger, at the margin, informants' desire to get revenge on former parties with whom they have quarreled. While the IRS may be guided by ethical and moral considerations in designing its bounty scheme, it nevertheless behaves as if it were cynically exploiting informants' emotional drives, cutting down on their fair share in the recovered amounts to help finance its efforts in prosecuting informed-upon evaders. Copyright 2001 by Blackwell Publishing Inc.

Suggested Citation

  • Yaniv, Gideon, 2001. " Revenge, Tax Informing, and the Optimal Bounty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(2), pages 225-233.
  • Handle: RePEc:bla:jpbect:v:3:y:2001:i:2:p:225-33
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=jpet&volume=3&issue=2&year=2001&part=null
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nir Dagan & Yossi Tobol, 2005. "Tax evasion, informants, and optimal auditing policy," Economic theory and game theory 021, Nir Dagan.
    2. Matthew Gould & Matthew Rablen, 2016. "Voluntary Disclosure Schemes for Offshore Tax Evasion: An Analysis," CESifo Working Paper Series 5750, CESifo Group Munich.
    3. repec:ebl:ecbull:v:8:y:2003:i:9:p:1-10 is not listed on IDEAS
    4. C├ęcile Bazart & Mickael Beaud & Dimitri Dubois, 2017. "Whistleblowing vs random audit: An experimental test of relative effciency," Working Papers 17-04, LAMETA, Universtiy of Montpellier.
    5. VafaI, Kouroche, 2005. "Abuse of authority and collusion in organizations," European Journal of Political Economy, Elsevier, vol. 21(2), pages 385-405, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:3:y:2001:i:2:p:225-33. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/apettea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.