Informal Sector and Taxation

Mohamed Jellal ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with a given taxpayer or activity and that taxpayer’s optimal declaration strategy with respect to fiscal agency. We also show that the degree of observability is critical in determining the optimal policies to be followed by the fiscal authorities. Our imperfect monitoring approach provides a new strategy for understanding the informal sector in LDCs, which can be interpreted as that group of economic activities characterized by low observability.

Keywords: Informal sector; information and observability; tax evasion; taxation (search for similar items in EconPapers)
JEL-codes: D21 H26 O12 O17 (search for similar items in EconPapers)
Date: 2009-08-02
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17129

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