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Tax Enforcement Problems

Francisco Marhuenda () and Ignacio Ortuño‐Ortín
Authors registered in the RePEc Author Service: Ignacio Ortuno Ortin

Scandinavian Journal of Economics, 1997, vol. 99, issue 1, 61-72

Abstract: We study an income tax enforcement problem using a principal‐agent model where the government sets the tax and inspection functions. These are announced to the agents and there is no commitment problem. The penalty function for dishonest taxpayers is given exogenously and satisfies certain social norms. We prove that, for a large family of penalty functions, this policy is such that honesty implies regressiveness. This result does not depend on the fact that agents know the true probability of inspection.

Date: 1997
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