Corruption and tax evasion an optimal policy

Jellal, Mohamed and Bouzahzah, Mohamed (2012): Corruption and tax evasion an optimal policy.

Abstract

Under Principal-Agent-Supervisor paradigm, we examine in this paper how a tax collection agency changes optimal schemes in order to lessen the occurrence of corruption between the tax collector and the taxpayer. The Principal, who maximizes the expected net fiscal revenue, reacts by decreasing tax rates when the supervisor is likely to engage in corrupt transaction with taxpayer.The combat against collusion and corruption may explain the greater reliance on indirect taxes than on direct taxes both in developed and developing countries like Morocco.

• Item Type: MPRA Paper
• Language: English
• Keywords: Principal,Supervisor,Agent, Corruption, Tax Evasion
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; H - Public Economics > H2 - Taxation, Subsidies, and Revenue; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance

References

Allingham, M. and A. Sandmo (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics 1, 323-338.

Andreoni, J., B. Erard, and J. Feinstein (1998). Tax compliance. Journal of Economic Literature 36, 818-860.

Besley, T. and J.McLaren (1993). Taxes and bribery: The role of wage incentives. Economic Journal 103, 119-141.

Boadway, R., Marchand .M and P. Pestieau (1994). Towards a Theory of the direct-indirect Tax mix. Journal of Public Economics 55, 71-88.

Border.,K and J.Sobel (1987). Samurai accountant: A Theory of auditing and plunder. Review of Economic Studies 54,525-540

Chander, P. and L. L. Wilde (1992). Corruption in tax administration. Journal of Public Economics 49, 33-349.

Chander, P. and L. L.Wilde (1998). A general characterization of optimalincome tax enforcement. Review of Economics Studies 65, 165-183.

Clotfelter, C. T. (1983). Tax evasion and tax rates. Review of Economics and Statistics 65, 363-373.

Cowell, F. A. (1985). Tax evasion with labor income. Journal of Public Economics 26,19-34.

Cowell, F. A. (1990). Cheating the Government. Cambridge, Massachusetts: The MIT Press.

Cowell, F. A. and J. P. F. Gordon (1988). Unwillingness to pay: tax evasion and public good provision. Journal of Public Economics 36, 305-321.

Cremer, H. and F. Gahvari (1994). Tax evasion, concealment and the optimal linear income tax. The Scandinavian Journal of Economics 96, 219-239.

Cremer, H., M. Marchand, and P. Pestieau (1990). Evading, auditing and taxing. the equity-compliance trade-off. Journal of Public Economics 43,67-92.

Dixit, A. and A. Sandmo (1977). Some simplified formulae for optimal income taxation. Scandinavian Journal of Economics 79, 417-423.

Dudley, L. And C.Montmarquette.(1987). Bureaucratic corruption as a constraint on voter Choice. Public Choice 55,127-160.

Flatters,F. And B. McLeod. (1995). Administrative corruption and taxation. International Tax and Public Finance 2, 397-417.

Fortin, B. and G. Lacroix (1996). Labour supply, tax evasion and the marginal cost of public funds. an empirical investigation. Journal of Public Economics 55, 407-431.

Greenberg ,J.(1984). Avoiding tax evasion: A repetead game theoretical approach. Journal of Economic Theory 32,1-13.

Hendriks,J. Keen,M. and A.Muthoo.(1999). Corruption extorsion and evasion. Journal of Public Economics 74, 395-430.

Kolm, S.C. (1973). A note on optimum tax evasion. Journal of Public Economics 2,256-270.

Laffont,J.J and J. Tirole (1993) . A Theory of Incentives in Procurement and Regulation. Cambridge, MIT Press.

Reinganum, J. F. and L. L. Wilde (1985). Income tax compliance in a principalagent framework. Journal of Public Economics 26, 1-18.

Reinganum, J. F. and L. L. Wilde (1986). Equilibrium verification and reporting rolicies in a model of tax compliance. International Economic Review 27, 739-760.

Scotchmer, S. (1987). Audit classes and tax enforcement policy. American Economic Review, Papers and Proceedings 77, 229—233.

Slemrod, J. and S. Yitzhaki (2002). Tax avoidance, evasion and administration.

In A. J. Auerbach and M. Feldstein (Eds.), Handbook of Public Economics, Volume 3, pp. 1423-1470. Amsterdam: North Holland.

Srinivasan, T.N.(1973). Tax evasion: A model . Journal of Public Economics 2,339-346.

Tirole, J. (1986) . Hierarchies and bureaucraties: on the role of collusion in organizations. Journal of Law and Economics Organization 2,181-214.

Tirole, J.(1992). Collusion and Theory of Organizations. In J.J. Laffont, ed., Advances in economic theory. Proceedings of the 6th world congres of The Econometric Society, Cambridge University Press, Cambridge, 151-206