Whistle-blowers as a Deterrent to Tax Evasion
The economic literature on audit design has almost entirely ignored tax agencies' practical reliance on whistle-blowers for the successful conduct of tax investigations. The authors compare the tax agency's performance under a one-round blind-audit policy and a two-round whistle-blowing-intensive policy that invites whistle-blowers to blow the whistle on tax evaders who have escaped auditing in the first round. The authors show that if providing incentives for tax evasion is desirable under the one-round blind-audit scheme, the tax agency might be better off running a second, whistle-blowing-triggered, round, threatening to audit a sufficiently high fraction of the denounced evaders that will deter them from evading taxes. Hence, there will actually be no denouncing by honest whistle-blowers, who will find themselves serving as a deterrent to tax evasion without actually satisfying their desire for revenge or collecting a monetary reward. Committed to its threat, the tax agency will only be auditing falsely denounced non-evaders.
Volume (Year): 38 (2010)
Issue (Month): 3 (May)
|Contact details of provider:|
When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:38:y:2010:i:3:p:306-320. 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: (SAGE Publications)
If references are entirely missing, you can add them using this form.