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Inspectors or Google Earth? Optimal fiscal policies under uncertain detection of evaders

Martin Besfamille and Pablo Olmos

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: Most of the contributions to the optimal tax-enforcement literature assume that audits are perfect and always discover evaders. However, evasion often remains undetected. To reduce the probability of such a failure, governments invest resources to improve their tax administrations’ detection technology. We incorporate these kind of investments into a model that studies optimal fiscal policies under uncertain detection of evaders. We characterize their level and we show numerically how they interact with the other dimensions of an optimal fiscal policy. Finally, we highlight the differences between our results and those obtained in a model without investment in audit technology.

Keywords: Tax; evasion; -; Tax; rates; -; Enforcement; -; Imperfect; audits; -; Investments; in; tax; administration (search for similar items in EconPapers)
JEL-codes: D82 H26 H83 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2010-08
New Economics Papers: this item is included in nep-acc and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2010-09

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