Tax evasion, information reporting, and the regressive bias hypothesis

Jori Pinje and Simon Boserup ()

MPRA Paper from University Library of Munich, Germany

Abstract: A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in e¤ective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency�s use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.

Keywords: tax evasion; tax enforcement; information reporting; auditing (search for similar items in EconPapers)
JEL-codes: D82 H26 K42 (search for similar items in EconPapers)
Date: 2011-01-26
New Economics Papers: this item is included in nep-acc and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/28406/1/MPRA_paper_28406.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/35935/1/MPRA_paper_35935.pdf revised version (application/pdf)

Related works:
Working Paper: Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28406

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