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|Title:||Audit probability versus effectiveness: The Beckerian approach revisited|
|Keywords:||Tax evasion;Tax compliance;Audit probability;Audit effectiveness;Revenue maximization;Probability weighting;Taxpayer uncertainty|
|Citation:||Economics and Finance Working Paper, Brunel University, 12-04, Feb 2012|
|Abstract:||The Beckerian approach to tax compliance examines how a tax authority can maximize social welfare by trading-off audit probability against the fine rate on undeclared tax. This paper offers an alternative examination of the privately optimal behavior of a tax authority tasked by government to maximize expected revenue. The tax authority is able to trade-off audit probability against audit effectiveness, but takes the fine rate as fixed in the short run. I find that the tax authority's privately optimal audit strategy does not maximize vol- untary compliance, and that voluntary compliance is non-monotonic as a function of the tax authority's budget. Last, the tax authority's privately optimal effective fine rate on undeclared tax does not exceed two at interior optima.|
|Appears in Collections:||Economics and Finance|
Dept of Economics and Finance Research Papers
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