Anti-evasion auditing policy in thepresence of common income shocks

Miguel Sanchez

STICERD - Distributional Analysis Research Programme Papers from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: When fairly homogeneous taxpayers are affected by common incomeshocks, a tax agency's optimal auditing strategy consists of auditing alow-income declarer with a probability that (weakly) increases with theother taxpayers' declarations. Such policy generates a coordination gameamong taxpayers, who then face both strategic uncertainty - about theequilibrium that will be selected.and fundamental uncertainty - about thetype of agency they face. Thus the situation can be realistically modelledas a global game that yields a unique and usually interior equilibriumwhich is consistent with empirical evidence.Results are also applicable to other areas like regulation or welfarebenefit allocation.

Keywords: Keywords: Tax Evasion; Coordination/Global Games; Expectations; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: C72 D82 D84 H26 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stidar:80

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