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Anti-evasion auditing policy in thepresence of common income shocks

Listed author(s):
  • Miguel Sanchez
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    When fairly homogeneous taxpayers are affected by common incomeshocks, a tax agency's optimal auditing strategy consists of auditing alow-income declarer with a probability that (weakly) increases with theother taxpayers' declarations. Such policy generates a coordination gameamong taxpayers, who then face both strategic uncertainty - about theequilibrium that will be selected.and fundamental uncertainty - about thetype of agency they face. Thus the situation can be realistically modelledas a global game that yields a unique and usually interior equilibriumwhich is consistent with empirical evidence.Results are also applicable to other areas like regulation or welfarebenefit allocation.

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    Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Distributional Analysis Research Programme Papers with number 80.

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    Date of creation: Feb 2006
    Handle: RePEc:cep:stidar:80
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