Tax Compliance by Firms and Audit Policy
Firms are usually better informed than tax authorities about market conditions and the potential profits of competitors. They may try to exploit this situation by underreporting their own taxable profits. The tax authority could offset firms' informational advantage by adopting "smarter" audit policies .that take into account the relationship between a firm's reported profits and reports for the industry as a whole. Such an audit policy will create an externality for the decision makers in the industry and this externality can be expected to affect not only firms' reporting policies but also their market decisions. If public policy takes into account wider economic issues than just revenue raising what is the appropriate way for a tax authority to run such an audit policy? We develop some clear policy rules in a standard model of an industry and show the effect of these rules using simulations.ca3
|Date of creation:||Sep 2010|
|Contact details of provider:|| Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484.
- Cowell, F.A., 1989. "Honesty is sometimes the best policy," European Economic Review, Elsevier, vol. 33(2-3), pages 605-617, March.
- Bayer, Ralph & Cowell, Frank, 2009.
"Tax compliance and firms' strategic interdependence,"
Journal of Public Economics,
Elsevier, vol. 93(11-12), pages 1131-1143, December.
- Ralph Bayer & Frank A Cowell, 2006. "Tax Compliance and Firms’ StrategicInterdependence," STICERD - Distributional Analysis Research Programme Papers 81, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Ralph-C Bayer & Frank Cowell, 2006. "Tax Compliance and Firms' Strategic Interdependence," School of Economics Working Papers 2006-09, University of Adelaide, School of Economics.
- R Bayer & Frank Cowell, 2006. "Tax compliance and firms' strategic interdependence," LSE Research Online Documents on Economics 2680, London School of Economics and Political Science, LSE Library.
- Kolm, Serge-Christophe, 1973. "A note on optimum tax evasion," Journal of Public Economics, Elsevier, vol. 2(3), pages 265-270, July.
- Martin Besfamille & Philippe De Donder & Jean Marie Lozachmeur, 2009. "Tax enforcement may decrease government revenue," Economics Bulletin, AccessEcon, vol. 29(4), pages 2665-2672.
- Marrelli, M. & Martina, R., 1988. "Tax evasion and strategic behaviour of the firms," Journal of Public Economics, Elsevier, vol. 37(1), pages 55-69, October.
- Lee, Kangoh, 1998. "Tax Evasion, Monopoly, and Nonneutral Profit Taxes," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 333-38, June.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
When requesting a correction, please mention this item's handle: RePEc:cep:stidar:102. 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: ()
If references are entirely missing, you can add them using this form.