Tax Audits, Tax Rewards and Labour Market Outcomes

Gaetano Lisi

Economies, 2023, vol. 11, issue 2, 1-12

Abstract: This theoretical paper studies the relation between tax audits and labour market outcomes (job creation and unemployment) in an economy that contemplates penalties for firms that evade taxes and rewards for firms that comply with tax rules. Intuitively, the simultaneous presence of penalty and reward amplifies the role of auditing, since tax audits allow both punishing tax-evading firms and rewarding fiscally honest firms. Indeed, the presence of tax rewards can make the effect of tax audits on firms’ net profits positive. However, the effect of tax audits on labour market outcomes is ambiguous. By setting the choice of optimal fiscal policy in a different and original way, this paper is able to derive a formula for the audit rate—consistent with the budget constraint—that makes the relation between tax audits and labour market outcomes positive.

Keywords: tax audits; tax evasion; tax reward; job creation; unemployment (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7099/11/2/60/pdf (application/pdf)
https://www.mdpi.com/2227-7099/11/2/60/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:11:y:2023:i:2:p:60-:d:1064358

Access Statistics for this article

Economies is currently edited by Ms. Adore Zhou

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().