Optimal tax auditing when some individuals need not file

In a situation in which people who are required to fill in a tax-return coexist with tax-return-exempt people, we prove that the optimal audit policy leads to different tax compliance behavior, depending on the difficulty of detecting an evader who does not fill in a tax return, passing himself of as a non-taxpayer. Copyright ©1996 Eisevier Science B.V. All rights reserved.