Auditing with Signals
This paper is a first step in the analysis of the use of signals of taxpayer's incomes by tax audit authorities. In a very simple model, we consider the design of the audit strategy when the tax authority can commit to it and has free access to a signal correlated with the taxpayer's true income. We discuss the optimal enforcement policy and compare it with the optimal one when only self-reported income is considered. Our main result is that the well-known regressive bias of revenue-maximizing audit rules may be convert in a progressive one when signals are used.
|Date of creation:||01 Aug 2000|
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- Cremer, H. & Marchand, M. & Pestieau, P., 1988.
"Evading, Auditing And Taxing: The Equity-Compliance Tradeoff,"
401, Cornell - Department of Economics.
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9610r, Wisconsin Madison - Social Systems.
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- Eduardo Engel & James Hines, 2000.
"Understanding Tax Evasion Dynamics,"
Econometric Society World Congress 2000 Contributed Papers
1117, Econometric Society.
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- Eduardo Engel & James R. Hines Jr., 1998. "Understanding Tax Evasion Dynamics," Documentos de Trabajo 47, Centro de Economía Aplicada, Universidad de Chile.
- Alm, James & Bahl, Roy & Murray, Matthew N., 1993. "Audit selection and income tax underreporting in the tax compliance game," Journal of Development Economics, Elsevier, vol. 42(1), pages 1-33, October.
- Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484.
- Parkash Chander & Louis L. Wilde, 1998. "A General Characterization of Optimal Income Tax Enforcement," Review of Economic Studies, Oxford University Press, vol. 65(1), pages 165-183.
- Sanchez, Isabel & Sobel, Joel, 1993. "Hierarchical design and enforcement of income tax policies," Journal of Public Economics, Elsevier, vol. 50(3), pages 345-369, March.
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