Anti-evasion auditing policy in the presence of common income shocks

Miguel Sanchez-Villalba
Authors registered in the RePEc Author Service: Miguel A. Sanchez Villalba

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: When fairly homogeneous taxpayers are affected by common income shocks, a tax agency’s optimal auditing strategy consists of auditing a low-income declarer with a probability that (weakly) increases with the other taxpayers’ declarations. Such policy generates a coordination game among taxpayers, who then face both strategic uncertainty - about the equilibrium that will be selected.and fundamental uncertainty - about the type of agency they face. Thus the situation can be realistically modelled as a global game that yields a unique and usually interior equilibrium which is consistent with empirical evidence. Results are also applicable to other areas like regulation or welfare benefit allocation.

Keywords: Keywords: Tax Evasion; Coordination/Global Games; Expectations; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: C72 D82 D84 H26 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-02
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:6543

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