Munich Personal RePEc Archive

Imperfect Detection of Tax Evasion in a Corrupt Tax Administration

Escobari, Diego (2011): Imperfect Detection of Tax Evasion in a Corrupt Tax Administration. Forthcoming in: Public Organization Review

[img]
Preview
PDF
MPRA_paper_39198.pdf

Download (683kB) | Preview

Abstract

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.

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.