We examine the optimal auditing problem of a tax authority when taxpayers can choose both to evade and avoid. For a convex penalty function the incentive-compatibility constraints may bind for the richest taxpayer and at a positive level of both evasion and avoidance. The audit function is non-increasing in reported income, and is higher for progressive tax functions than for regressive tax functions. Higher marginal tax rates increase the incentives for non-compliance, overturning the well-known Yitzhaki paradox.
|Titolo della pubblicazione ospite||The Routledge Companion to Tax Avoidance Research|
|Editor||Nigar and Epifantseva, Yulia Hashimzade|
|Numero di pagine||27|
|Stato di pubblicazione||Pubblicato - 2017|
- Tax avoidance, Tax evasion, Optimal auditing, Tax administration