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Tax Complexity: Problem or Opportunity?

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  • Kate Krause

    (University of New Mexico)

Abstract

When laws are complex or ambiguous, compliance and enforcement suffer. In the United States, the federal income tax is a familiar example of this. Often, neither the taxpayer nor the Internal Revenue Service (IRS) can perfectly determine a taxpayer's true tax liability. Uncertainty, ignorance, and burdensome documentation requirements deter some taxpayers from taking advantage of legitimate deductions and credits, whereas others find opportunities for creative tax avoidance in ambiguous provisions. Complexity undermines the IRS's ability to distinguish among intentional evasion, honest misinterpretation of the tax code, and legitimate tax avoidance. This model shows that the IRS cannot always profitably exploit complexity.

Suggested Citation

  • Kate Krause, 2000. "Tax Complexity: Problem or Opportunity?," Public Finance Review, , vol. 28(5), pages 395-414, September.
  • Handle: RePEc:sae:pubfin:v:28:y:2000:i:5:p:395-414
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    Cited by:

    1. Alm, James & Cherry, Todd & Jones, Michael & McKee, Michael, 2010. "Taxpayer information assistance services and tax compliance behavior," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 577-586, August.
    2. Pántya, József & Kovács, Judit & Kogler, Christoph & Kirchler, Erich, 2016. "Work performance and tax compliance in flat and progressive tax systems," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 262-273.
    3. Christian A. Vossler & Michael McKee, 2013. "Efficient tax reporting: The effects of taxpayer information services," Working Papers 13-24, Department of Economics, Appalachian State University.
    4. Torgler, Benno & Demir, Ihsan C. & Macintyre, Alison & Schaffner, Markus, 2008. "Causes and Consequences of Tax Morale: An Empirical Investigation," Economic Analysis and Policy, Elsevier, vol. 38(2), pages 313-339, September.
    5. Alm, James & Cherry, Todd & Jones, Michael & McKee, Michael, 2010. "Taxpayer information assistance services and tax compliance behavior," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 577-586, August.
    6. repec:bla:ecinqu:v:55:y:2017:i:2:p:920-940 is not listed on IDEAS
    7. Barbaro, Salvatore & Suedekum, Jens, 2006. "Reforming a complicated income tax system: The political economy perspective," European Journal of Political Economy, Elsevier, vol. 22(1), pages 41-59, March.
    8. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.
    9. David Bruner & Michael Jones & Michael McKee & Christian Vossler, 2015. "Tax Reporting Behavior: Underreporting Opportunities and Prepopulated Tax Returns," Working Papers 15-11, Department of Economics, Appalachian State University.

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