Tax Avoidance and Optimal Income Tax Enforcement

Authors

  • Duccio Gamannossi degl’Innocenti Department of Economics and Tax Administration Research Centre, University of Exeter, Exeter, Devon, U.K.
  • Matthew Rablen Department of Economics, University of Sheffield, Sheffield, UK; Tax Administration Research Centre, University of Exeter, Exeter, Devon, U.K.

Abstract

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.

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Volume 3.2 of JOTA -  Gamannossi degl’Innocenti and Rablen Cover

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Published

06-12-2017

How to Cite

Gamannossi degl’Innocenti, D., & Rablen, M. (2017). Tax Avoidance and Optimal Income Tax Enforcement. Journal of Tax Administration, 3(2), 36–64. Retrieved from https://jota.website/jota/article/view/106

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