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Title: Audit probability versus effectiveness: The Beckerian approach revisited
Authors: Rablen, MD
Keywords: Tax evasion;Tax compliance;Audit probability;Audit effectiveness;Reveneu maximization;Probability weighting;Taxpayer uncertainty
Issue Date: 2014
Publisher: Wiley
Citation: Journal of Public Economic Theory, 16(2), 322 - 342, 2014
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 voluntary compliance, and that voluntary compliance is nonmonotonic as a function of the tax authority's budget. Finally, the tax authority's privately optimal effective fine rate on undeclared tax does not exceed two at interior optima.
Description: This is the accepted version of the following article: RABLEN, M. D. (2014), Audit Probability versus Effectiveness: The Beckerian Approach Revisited. Journal of Public Economic Theory, 16: 322–342, which has been published in final form at
ISSN: 1097-3923
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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