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Tax Enforcement Problems
Author(s) -
Marhuenda Francisco,
OrtuñoOrtín Ignacio
Publication year - 1997
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00047
Subject(s) - honesty , enforcement , economics , social welfare function , government (linguistics) , income tax , principal (computer security) , function (biology) , microeconomics , public economics , welfare , computer science , law , political science , computer security , market economy , linguistics , philosophy , evolutionary biology , biology
We study an income tax enforcement problem using a principal‐agent model where the government sets the tax and inspection functions. These are announced to the agents and there is no commitment problem. The penalty function for dishonest taxpayers is given exogenously and satisfies certain social norms. We prove that, for a large family of penalty functions, this policy is such that honesty implies regressiveness. This result does not depend on the fact that agents know the true probability of inspection.