Targeting occupations with varying reputations to increase tax revenue

Adam Forest and Erich Kirchler

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2010, vol. 39, issue 3, 400-406

Abstract: If the government's goal is to raise tax revenue in a cost-effective manner, which (if any) occupation categories could be targeted with a higher probability of an audit to yield increased revenue? Looking beyond mere opportunity to evade (e.g., self-employment) and starting from the premise that taxpayers in certain occupations evade more than others, the issue is whether these taxpayers respond to a change in the audit rate. Theory suggests that compliance increases in response to higher audit rates; the occupations with the higher evaders could therefore be targeted. This theory is tested by drawing a connection between occupation, reputation, and tax compliance. We assume that taxpayers in occupations with high need for reputation respond to a lower extent to increased tax audits than taxpayers whose achievement does not depend on reputation. The results support the effectiveness of raising tax revenue by targeting specific occupations, non-managers, with a higher probability of an audit.

Keywords: Deterrence; Occupation; Ordered; probit; Reputation; Tax; compliance; Tax; evasion (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:39:y:2010:i:3:p:400-406

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