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Optimal inspection policy and income-tax compliance

  • Inés Macho Stadler

    ()

    (Universidad Autonóma de Barcelona)

  • David Perez-Castrillo

    ()

    (Universidad Autónoma de Barcelona)

In this paper, we present a review of the literature on optimal auditing of tax evasion and we fill some existing gaps with new results. The main contribution is to give a unified vision on the optimal audit policy when the Agency can pool the taxpayers as a function of the main activity they obtain the income from (because it determines their income distribution and their possibilities to evade), or as result of some additional information about them. We also study the consequences of the existence of a group of taxpayers who are characteristic since they are always honest.

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File URL: http://www.ief.es/documentos/recursos/publicaciones/revistas/hac_pub/173_PolInspec.pdf
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Article provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.

Volume (Year): 173 (2005)
Issue (Month): 2 (June)
Pages: 9-45

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Handle: RePEc:hpe:journl:y:2005:v:173:i:2:p:9-45
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  1. Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243259, March.
  2. Macho-Stadler, Ines & Perez-Castrillo, J David, 2002. "Auditing with Signals," Economica, London School of Economics and Political Science, vol. 69(273), pages 1-20, February.
  3. Luigi Alberto Franzoni, 2004. "Discretion in Tax Enforcement," Economica, London School of Economics and Political Science, vol. 71(283), pages 369-389, 08.
  4. Graetz, Michael J. & Reinganum, Jennifer F. & Wilde, Louis L., . "The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement," Working Papers 589, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Ines Macho-Stadler & David Pérez-Castrillo, 2002. "Settlement in Tax Evasion Prosecution," CESifo Working Paper Series 814, CESifo Group Munich.
  6. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  7. Inés Macho-Stadler & David Pérez-Castrillo, 2004. "Optimal Enforcement Policy and Firm's Emissions and Compliance with Environmental Taxes," Working Papers 124, Barcelona Graduate School of Economics.
  8. Brian Erard & Jonathan S. Feinstein, 1994. "Honesty and Evasion in the Tax Compliance Game," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 1-19, Spring.
  9. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June.
  10. Macho-Stadler, Ines & Perez-Castrillo, J David, 1997. "Optimal Auditing with Heterogeneous Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 951-68, November.
  11. Chander, Parkash & Wilde, Louis L, 1998. "A General Characterization of Optimal Income Tax Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 165-83, January.
  12. Panayiota Lyssiotou & Panos Pashardes & Thanasis Stengos, 2004. "Estimates of the black economy based on consumer demand approaches," Economic Journal, Royal Economic Society, vol. 114(497), pages 622-640, 07.
  13. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
  14. Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June.
  15. Alm, James & Bahl, Roy & Murray, Matthew N, 1990. "Tax Structure and Tax Compliance," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 603-13, November.
  16. Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
  17. Laurent Franckx, 1998. "The use of ambient inspections in environmental monitoring and enforcement when the inspection agency cannot commit itself to announced inspection probabilities," Center for Economic Studies - Discussion papers ces9835, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  18. Sheffrin, S.M. & Triest, R.K., 1991. "Can Brute Deterrence Backfire? Perceptions and Attitudes in Taxpayer Compliance," Papers 373, California Davis - Institute of Governmental Affairs.
  19. Chu, C. Y. Cyrus, 1990. "Plea bargaining with the irs," Journal of Public Economics, Elsevier, vol. 41(3), pages 319-333, April.
  20. Franzoni, Luigi Alberto, 2000. "Amnesties, Settlements and Optimal Tax Enforcement," Economica, London School of Economics and Political Science, vol. 67(266), pages 153-76, May.
  21. Perez-Castrillo, David & Riedinger, Nicolas, 2004. "Auditing cost overrun claims," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 267-285, June.
  22. Heyes, Anthony, 2002. "A Theory of Filtered Enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 34-46, January.
  23. Scotchmer, Suzanne, 1992. "The Regressive Bias in Tax Enforcement," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 366-71.
  24. Sanchez, Isabel & Sobel, Joel, 1993. "Hierarchical design and enforcement of income tax policies," Journal of Public Economics, Elsevier, vol. 50(3), pages 345-369, March.
  25. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, vol. 39(1), pages 17-32, June.
  26. Border, Kim C & Sobel, Joel, 1987. "Samurai Accountant: A Theory of Auditing and Plunder," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 525-40, October.
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