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Imperfect Detection of Tax Evasion in a Corrupt Tax Administration

  • Diego Escobari

    ()

This article models the imperfect detection of tax evasion motivated by the existence of a corrupt tax administration. Consistent with previous literature, fines and audit probabilities both have a positive effect on compliance. Moreover, the model shows that they have a negative effect on the bribes paid to corrupt tax officials. More corruption decreases compliance levels, giving honest auditors incentives to work harder to detect evasion. Giving inspectors a share of the detected evasion (tax farming) makes auditors work harder; however, increasing their wages reduces their exerted effort to discover evasion. Higher compliance can as well be achieved by hiring more efficient inspectors. Copyright Springer Science+Business Media, LLC 2012

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File URL: http://hdl.handle.net/10.1007/s11115-011-0172-5
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Article provided by Springer in its journal Public Organization Review.

Volume (Year): 12 (2012)
Issue (Month): 4 (December)
Pages: 317-330

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Handle: RePEc:kap:porgrv:v:12:y:2012:i:4:p:317-330
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=106610

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