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The Optimal Size of a Tax Collection Agency

  • Joel Slemrod
  • Shlomo Yitzhaki

This paper addresses the optimal degree of law enforcement regarding tax evasion. It derives the conditions that characterize the optimal size of a tax collection agency, and then provides a simple interpretation of the conditions in terms of excess burden.The paper clarified earlier findings that suggest that the optimal size should be set higher than a simple cost-benefit calculation would indicate. It concludes with a numerical example that illustrates the optimality condition and demonstrates that a policy based on a naive cost-benefit analysis of the tax collection agency could result in a substantial overcommitment of resources.

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File URL: http://www.nber.org/papers/w1759.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1759.

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Date of creation: Oct 1985
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Publication status: published as Slemrod, Joel and Shlomo Yitzhaki. "The Optimal Size of a Tax Collection Agency," Scandinavian Journal of Economics, vol.89, pp183-192, 1987W
Handle: RePEc:nbr:nberwo:1759
Note: PE
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  1. Joseph E. Stiglitz, 1981. "Utilitarianism and Horizontal Equity: The Case for Random Taxation," NBER Working Papers 0694, National Bureau of Economic Research, Inc.
  2. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
  3. 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.
  4. Christiansen, Vidar, 1980. "Two comments on tax evasion," Journal of Public Economics, Elsevier, vol. 13(3), pages 389-393, June.
  5. Christiansen, Vidar, 1980. "Two Comments on Tax Evasion," Empirical Economics, Springer, vol. 13(3), pages 389-93, June.
  6. Sandmo, Agnar, 1981. "Income tax evasion, labour supply, and the equity--efficiency tradeoff," Journal of Public Economics, Elsevier, vol. 16(3), pages 265-288, December.
  7. Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-52, December.
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