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Sound taxation? On the use of self-declared value

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  • Haan, M. A.
  • Heijnen, P.

    () (Universiteit van Amsterdam)

  • Schoonbeek, L.
  • Toolsema, L. A.

Abstract

In the 16th century, foreign ships passing through the Sound had to pay ad valorem taxes, known as the Sound Dues. To give skippers an incentive to declare the true value of their cargo, the Danish Crown reserved the right to purchase it at the declared value. We show that it is an equilibrium for the authorities to confiscate the cargo with some fixed probability independent of the declared value. This does not induce truth-telling, but does generate the desired tax revenue. Other applications of this framework include the dissolution of partnerships, and the auditing of income tax returns.

Suggested Citation

  • Haan, M. A. & Heijnen, P. & Schoonbeek, L. & Toolsema, L. A., 2008. "Sound taxation? On the use of self-declared value," CeNDEF Working Papers 08-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  • Handle: RePEc:ams:ndfwpp:08-02
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    References listed on IDEAS

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    1. Kim-Sau Chung & J.C. Ely, 2007. "Foundations of Dominant-Strategy Mechanisms," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 447-476.
    2. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(2), pages 445-469, August.
    3. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    4. Haan, Marco A. & Heijnen, Pim & Schoonbeek, Lambert & Toolsema, Linda A., 2012. "Sound taxation? On the use of self-declared value," European Economic Review, Elsevier, vol. 56(2), pages 205-215.
    5. Kim C. Border & Joel Sobel, 1987. "Samurai Accountant: A Theory of Auditing and Plunder," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 525-540.
    6. Yigal Gerchak & J. David Fuller, 1992. "Optimal Value Declaration in "Buy-Sell" Situations," Management Science, INFORMS, vol. 38(1), pages 48-56, January.
    7. Odlyzko Andrew, 2004. "The Evolution of Price Discrimination in Transportation and its Implications for the Internet," Review of Network Economics, De Gruyter, vol. 3(3), pages 1-24, September.
    8. Niou, Emerson M S & Tan, Guofu, 1994. "An Analysis of Dr. Sun Yat-sen's Self-Assessment Scheme for Land Taxation," Public Choice, Springer, vol. 78(1), pages 103-114, January.
    9. Benny Moldovanu, 2002. "How to Dissolve a Partnership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 1-66, March.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Intangible tax proposal - further thoughts
      by Ken Jarboe in The Intangible Economy on 2009-05-15 17:18:12

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    Cited by:

    1. Haan, Marco A. & Heijnen, Pim & Schoonbeek, Lambert & Toolsema, Linda A., 2012. "Sound taxation? On the use of self-declared value," European Economic Review, Elsevier, vol. 56(2), pages 205-215.
    2. repec:eee:transe:v:109:y:2018:i:c:p:293-310 is not listed on IDEAS

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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