Escobari, Diego (2011): Imperfect Detection of Tax Evasion in a Corrupt Tax Administration. Forthcoming in: Public Organization Review
Download (683kB) | Preview
This article models the imperfect detection of tax evasion motivated by the existence of a corrupt tax administration. Consistent with previous literature, fines and audit probabilities both have a positive effect on compliance. Moreover, the model shows that they have a negative effect on the bribes paid to corrupt tax officials. More corruption decreases compliance levels, giving honest auditors incentives to work harder to detect evasion. Giving inspectors a share of the detected evasion (tax farming) makes auditors work harder; however, increasing their wages reduces their exerted effort to discover evasion. Higher compliance can as well be achieved by hiring more efficient inspectors.
|Item Type:||MPRA Paper|
|Original Title:||Imperfect Detection of Tax Evasion in a Corrupt Tax Administration|
|Keywords:||Taxation; Evasion; Corruption|
|Subjects:||D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials
H - Public Economics > H8 - Miscellaneous Issues > H83 - Public Administration ; Public Sector Accounting and Audits
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance
|Depositing User:||Diego Escobari|
|Date Deposited:||03. Jun 2012 16:16|
|Last Modified:||20. Feb 2013 14:21|
Acconcia, A., M. D’Amato, and R. Martina (2003), “Tax Evasion and Corruption in Tax Administration”, mimeo.
Allingham, M. and A. Sandmo (1972), “Income Tax Evasion: A Theoretical Analysis”, Journal of Public Economics, 1(3-4): 323-338.
Andreoni, J., B. Erard and J. Feinstein (1998), “Tax Compliance”, Journal of Economic Literature, 36(2): 818-860.
Bernasconi, M. (1998), “Tax Evasion and Orders of Risk Aversion”, Journal of Public Economics, 67(1): 123-134.
Bilotkach, V. (2006), “A Tax Evasion – Bribery Game: Experimental Evidence from Ukraine”, The European Journal of Comparative Economics, 3(1): 31-49.
Camerer, C.F. and T.H. Ho (1994), “Violations of the Betweenness Axioms and Nonlinearity in Probability”, Journal of Risk and Uncertainty, 8(2): 167-196.
Chander, P. and L. Wilde (1992), “Corruption in Tax Administration”, Journal of Public Economics, 49(3): 333-349.
Chu, C.Y. (1990), “A Model of Income Tax Evasion with Venal Tax Officials - The Case of Taiwan”, Public Finance, 45(3): 392-408.
Epstein L.G. (1992), “Behavior under Risk: Recent Developments in Theory and Applications” in J.J. Laffont (ed), Advances in Economic Theory: Sixth World Congress of the Econometric Society (2), Cambridge University Press, pp. 1-63.
Esteller-Moré, A. (2003), “Tax Evasion in Interrelated Taxes”, Unpublished working paper, University of Barcelona.
Feinstein, J.S. (1991), “An Econometric Analysis of Income Tax Evasion and Its Detection”, Rand Journal of Economics, 22(1): 14-35.
Goerke, L. (2008), “Bureaucratic Corruption and Profit Tax Evasion”, Economics of Governance, 9(2): 177-196.
Hindriks, J., M. Keen and A. Muthoo (1999), “Corruption, Extortion and Evasion”, Journal of Public Economics, 74(3): 395-430.
Jain A. (2001), “Corruption: A Review”, Journal of Economic Surveys, 15(1): 71-121.
Karni, E. and D. Schmeidler (1990), “Utility Theory with Uncertainty” in W. Hildenbrand and H. Sonnenschein (eds), Handbook of Mathematical Economics (4), North-Holland, pp. 1763-1831.
Lee, K. (2001), “Tax Evasion and Self-insurance”, Journal of Public Economics, 81(1): 73-81.
Sanyal, A., I. Gang, and O. Goswami (2000), “Corruption, Tax Evasion and the Laffer Curve”, Public Choice, 105(1-2): 61-78.
Slemrod, J. and S. Yitzhaki (2002), “Tax Avoidance, Evasion and Administration” in A. Auerbach and M. Feldstein (eds), Handbook of Public Economics (22), Elsevier Science B.V., pp. 1423-1470.
Tanzi, V. and H.R. Davoodi (2001), “Corruption, Growth, and Public Finances” in K.J. Arvind (ed), Political Economy of Corruption, Routledge, pp. 89-110.
Vasina, P.A. (2003), “Optimal Tax Enforcement with Imperfect Tax Payers and Inspectors”, Computational Mathematics and Modeling, 14(3): 309-318.
Wane, W. (2000), “Tax Evasion, Corruption, and the Remuneration of Heterogeneous Inspectors”, World Bank Policy Research Working Paper No. 2394.
Yitzhaki, S. (1974), “Income Tax Evasion: A Note”, Journal of Public Economics, 3(3): 201-202.