Tax compliance with endogenous audit selection and heterogeneity of income

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F19%3A00108136" target="_blank" >RIV/00216224:14560/19:00108136 - isvavai.cz</a>

Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Tax compliance with endogenous audit selection and heterogeneity of income

Popis výsledku v původním jazyce

It has been shown in the experimental tax compliance literature that endogenous audit selection mechanism (ASM) increases tax compliance. However, this literature assumes that the tax authority has an unbiased observation of the actual taxpayers' income and consequently the taxpayers with the largest difference between the observed and reported income are most likely to be selected for audit. In reality, the tax authority might not have unbiased information about the actual incomes as these might be observed only for taxpayers who have been selected for audit. In this case, the ASM can be based only on reported incomes. The aim of the paper is to design an endogenous ASM that uses only the reported incomes and experimentally compare the tax compliance under the endogenous and random ASMs. We develop a theoretical model where taxpayers have heterogeneous income and the ASM is based only on the reported income. We show that in the symmetric Bayes-Nash equilibrium the proposed endogenous ASM entails a higher reported income than the random ASM. We test predictions of the model in an economic experiment. Each experimental session consists of 30 rounds. In each round, subjects may be selected for audit with a certain audit probability. In the random ASM, the probability of audit is exogenous and the same for all taxpayers.

Název v anglickém jazyce

Tax compliance with endogenous audit selection and heterogeneity of income

Popis výsledku anglicky

It has been shown in the experimental tax compliance literature that endogenous audit selection mechanism (ASM) increases tax compliance. However, this literature assumes that the tax authority has an unbiased observation of the actual taxpayers' income and consequently the taxpayers with the largest difference between the observed and reported income are most likely to be selected for audit. In reality, the tax authority might not have unbiased information about the actual incomes as these might be observed only for taxpayers who have been selected for audit. In this case, the ASM can be based only on reported incomes. The aim of the paper is to design an endogenous ASM that uses only the reported incomes and experimentally compare the tax compliance under the endogenous and random ASMs. We develop a theoretical model where taxpayers have heterogeneous income and the ASM is based only on the reported income. We show that in the symmetric Bayes-Nash equilibrium the proposed endogenous ASM entails a higher reported income than the random ASM. We test predictions of the model in an economic experiment. Each experimental session consists of 30 rounds. In each round, subjects may be selected for audit with a certain audit probability. In the random ASM, the probability of audit is exogenous and the same for all taxpayers.

Druh

O - Ostatní výsledky

CEP obor

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OECD FORD obor

50200 - Economics and Business

Projekt

<a href="/cs/project/GA17-00496S" target="_blank" >GA17-00496S: Vliv konkurenčních kontrolních mechanismů na dodržování daňových předpisů: experimentální přístup</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2019

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů