Modernization of Tax Administrations and Optimal Fiscal Policies

Martin Besfamille and Cecilia Parlatore

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: Since Sandmo (1981), many articles have analyzed optimal fiscal policies in economies with tax evasion. All share a feature: they assume that the cost of enforcing the tax law is exogenous. However, governments often invest resources to reduce these enforcement costs. In a very simple model, we incorporate such investments in the analysis of an optimal fiscal policy. We characterize their optimal level and we show numerically how they interact with the other dimensions of the optimal fiscal policy. Finally, we highlight the differences between our results and those obtained in a model without investment in the tax administration.

Keywords: Tax administration; Tax rates; Tax evasion; Enforcement; Audit costs. (search for similar items in EconPapers)
JEL-codes: D82 H26 H83 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-07
New Economics Papers: this item is included in nep-acc and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Modernization of Tax Administrations and Optimal Fiscal Policies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2009-07

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