The shadow price of a tax inspector
Theeffects of tax evasion on tax rates and government revenues have focused fresh attention on the question of tax administration. Because of the difficulties of measuring the consequences of good or bad administration, policymakers cannot rely on a wide range of specific information on this subject. This paper presents a model which shows the process of auditing tax returns as a decision tree. Using this model, governments can verify that the additional power is not abused and that the administration is efficient. The main idea is to introduce economic considerations into the process of selecting and inspecting tax returns. By calculating the investment in the inspector's time at each stage (the taxpayer is likely to appeal), and the increase in revenue that would result, it is possible to calculate the minimum amount of tax evasion that justifies continuing the audit - the shadow price of the tax inspector. If the guidelines are followed the productivity of the inspectors will increase as well.
|Date of creation:||30 Sep 1988|
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- Joel Slemrod, 1988.
"Are Estimated Tax Elasticities Really Just Tax Evasion Elasticities? The Case of Charitable Contributions,"
NBER Working Papers
2733, National Bureau of Economic Research, Inc.
- Slemrod, Joel, 1989. "Are Estimated Tax Elasticities Really Just Tax Evasion Elasticities? The Case of Charitable Contributions," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 517-22, August.
- Greenberg, Joseph, 1984. "Avoiding tax avoidance: A (repeated) game-theoretic approach," Journal of Economic Theory, Elsevier, vol. 32(1), pages 1-13, February.
- C. Eugene Steuerle, 1986. "Who Should Pay For Collecting Taxes," Books, American Enterprise Institute, number 650820, February.
- Richard Goode, 1981. "Some Economic Aspects of Tax Administration (Quelques aspects Ã©conomiques de l'administration fiscale) (Algunos aspectos econÃ³micos de la administraciÃ³n de impuestos)," IMF Staff Papers, Palgrave Macmillan, vol. 28(2), pages 249-274, June.
- Usher, Dan, 1986.
"Tax Evasion and the Marginal Cost of Public Funds,"
Western Economic Association International, vol. 24(4), pages 563-86, October.
- 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.
- Yitzhaki, Shlomo, 1979. "A Note on Optimal Taxation and Administrative Costs," American Economic Review, American Economic Association, vol. 69(3), pages 475-80, June.
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