Imperfect Detection of Tax Evasion in a Corrupt Tax Administration

Diego Escobari

MPRA Paper from University Library of Munich, Germany

Abstract: This article models the imperfect detection of tax evasion motivated by the existence of a corrupt tax administration. Consistent with previous literature, fines and audit probabilities both have a positive effect on compliance. Moreover, the model shows that they have a negative effect on the bribes paid to corrupt tax officials. More corruption decreases compliance levels, giving honest auditors incentives to work harder to detect evasion. Giving inspectors a share of the detected evasion (tax farming) makes auditors work harder; however, increasing their wages reduces their exerted effort to discover evasion. Higher compliance can as well be achieved by hiring more efficient inspectors.

Keywords: Taxation; Evasion; Corruption (search for similar items in EconPapers)
JEL-codes: D73 H26 H83 J31 (search for similar items in EconPapers)
Date: 2011-07-27
New Economics Papers: this item is included in nep-acc, nep-iue and nep-pbe
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https://mpra.ub.uni-muenchen.de/39198/1/MPRA_paper_39198.pdf original version (application/pdf)

Related works:
Journal Article: Imperfect Detection of Tax Evasion in a Corrupt Tax Administration (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39198

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