Abstract
This paper is a first step in analysing the use of statistical information about taxpayers' incomes by tax audit authorities. In a very simple model, we consider the design of the audit strategy when the tax authority can commit to it and has free access to a signal correlated with the taxpayer's true income. We discuss the optimal enforcement policy and compare it with the optimal one when only self-reported income is considered. Our main result postulates that the well-known regressive bias of revenue-maximizing audit rules may be reversed into a progressive one when signals are used.
Original language | English |
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Pages (from-to) | 1-20 |
Journal | Economica |
Volume | 69 |
DOIs | |
Publication status | Published - 1 Jan 2002 |