The Runaway Taxpayer or: Is Prior Tax Notice Effective against Scofflaws?

Simone Pellegrino (), Massimiliano Piacenza () and Gilberto TURATI ()

No 1, Working Papers from University of Torino, Department of Economics and Public Finance "G. Prato"

Abstract: In this paper we study how prior tax notice (following audit and detection of tax fraud by Tax Authorities) affects individual behaviour in terms of tax compliance. We start with a very stylised theoretical framework, considering a situation in which an individual has been already audited and caught as tax evader, and knows that the Tax Authorities are looking for her to cash the due amount of taxes. We concentrate on the decision to move in order to avoid paying the bill, and derive the optimal number of times an individual should move equalising marginal costs and benefits of the decision. We then carry out an empirical analysis based on real data provided by an Italian collection agency for the period 2004-2007. Our results show that previous notice reduces the probability to move, but its cost is not large enough to correct the individual incentive to escape Tax Authorities.

Keywords: tax-enforcement; individual compliance decisions; prior notice (search for similar items in EconPapers)
JEL-codes: H26 H31 K42 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-law and nep-pbe
Date: 2008-05
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http://web.econ.unito.it/prato/papers/n1.pdf First version, 2008 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:tur:wpaper:1

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