Audits or Distortions: The Optimal Scheme to Enforce Self-Employment Income Taxes

Arbeitspapier

I investigate the optimal auditing scheme for a revenue-maximizing tax-collection agency that observes not only reported pro ts, but also the level of employment at each firm. Each firm is owned by a single entrepreneur whose managerial ability is random. The optimal auditing scheme is discontinuous and non-monotone in ability. In intermediate audit costs, less-productive entrepreneurs face auditing probabilities that increase in ability, whereas the ablest ones are not audited. Finally, the effecive tax rate is higher in the middle of the managerial ability distribution; thus, the overall regressive (or progressive) bias that arises from evasion is unknown.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Texto para discussão ; No. 590

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Tax Evasion and Avoidance ; Illegal Behavior and the Enforcement of Law

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Zilberman, Eduardo
• Event: Veröffentlichung
• (who): Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia
• (where): Rio de Janeiro
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/176073
• Last update: 10.03.2025, 11:42 AM CET