Cost Padding, Auditing and Collusion

Laffont,; Tirole,

doi:10.2307/20075864

Cited by 20 publications

(7 citation statements)

References 4 publications

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“…2 Work in this area includesBecker (1968),Stigler (1970),Allingham and Sandmo (1972), and the surveys byCowell (1985Cowell ( , 1990. 3 SeeHarris (1970),Ehrlich (1975),Carr-Hill and Stern (1979),Polinsky and Shavell (1979),Block and Sidak (1980),Png (1986),Laffont and Tirole (1992),Andreoni (1991),Kaplow (1992), andKofman and Lawarree (1993).…”

mentioning

confidence: 99%

Jointly Optimal Taxes and Enforcement Policies in Response to Tax Evasion

Possen

Slutsky

2004

J Public Economic Theory

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Assuming the government cannot fully observe either individual types or incomes and jointly picks optimal taxes and audit policies against evasion can significantly alter standard results from optimal income taxation and tax-evasion models, which treat these separately. We consider this when individuals differ in their risk preferences and incomes. Given the resulting complexity, supplementing analytic results with numerical analysis helps explain the structure of the resulting policies and how they change when the distribution of income or the revenue requirements of the government change. We do this analysis with and without audit errors and with incomes exogenous or affected by occupational choice.

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mentioning

confidence: 99%

Jointly Optimal Taxes and Enforcement Policies in Response to Tax Evasion

Possen

Slutsky

2004

J Public Economic Theory

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“…For a model where the principal can observe the manager's effort rather than θ, see, e.g., Laffont and Tirole (1992) and Kessler (2000).…”

Section: The Modelmentioning

confidence: 99%

“…Hence, F can be interpreted as the maximum amount the agent is (legally) liable for. Alternatively, one could interpret the agent's limited liability as a wealth constraint as, e.g., in Laffont and Tirole (1992). Penalties are then transfer dependent: the higher the agent's remuneration, the more can he be held liable.…”

Section: Optimal Contracts With Auditingmentioning

confidence: 99%

Monitoring and Productive Efficiency in Public and Private Firms

Kessler¹,

Lülfesmann²

2002

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The paper compares productive efficiency in public and private firms. We study a principalagent model in which the firm's manager is privately informed about a cost parameter and exerts unobservable cost reducing effort, while the owner can conduct costly audits to obtain information about the firm's cost. Without auditing, managerial effort (and therefore production efficiency) is strictly higher under public governance with a benevolent government. If auditing is possible, however, a profit-maximizing private owner always audits at least as frequently as a public principal. For small auditing costs, we find that monitoring decisions, managerial effort and welfare under both governance structures coincide. Conversely, when audits becomes more expensive, the public (but not the private) owner refrains from monitoring, and the private firm may produce more cost efficiently.

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“…4 For a discussion and examples of bureaucrats' discretionary power over the private sector, see for instance Tanzi and Davoodi (2002) and Rose-Ackerman (1997, 2004. 5 Laffont and Tirole (1992) examine the effect of incentives schemes and monitoring to prevent collusion in the context of procurement and regulation. They discuss different cases where a supervisor might engage in side-payments with different types of firms and suggest a set of corresponding incentives schemes to avoid collusion in equilibrium in the context of a representative supervisor.…”

Section: Introductionmentioning

confidence: 99%

Fiscal policy and corruption

Gauthier

Goyette

2015

Soc Choice Welf

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This paper develops a simple model of corruption between a tax inspector and a taxpayer in which inspectors' heterogeneity helps explain why it may be optimal for a revenue-maximizing government to tolerate corruption. In our model, tax inspectors could accept a bribe from a taxpayer for under-reporting his income or to avoid harassment in the form of red tape. The government's problem is to design a tax policy and the associated monitoring probability to enforce it. Raising tax rates increases enforcement costs as it increases bribery incentives, so it is optimal not to set tax rates at a too high level. The optimal tax policy includes an optimal supervision level required to reduce corruption, which in turns depends on tax collectors' capacity to impose red tape on taxpayers. When bureaucrats are heterogeneous in terms of their capacity to impose red tape costs, an intermediate detection probability might be appropriate efficiency-wise even if it means tolerating some level of corruption. Bureaucrats' heterogeneity as the likely source of observation of corruption in equilibrium is generic to various environments in which agents' delegated power is misused for private gains and various examples are discussed in the paper. We also show how a government could face lose-lose as well as win-win situations in the conduct of its revenue collection policies. JEL Classification D73 · H21 · H26 · H32

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Cost Padding, Auditing and Collusion

Cited by 20 publications

References 4 publications

Jointly Optimal Taxes and Enforcement Policies in Response to Tax Evasion

Jointly Optimal Taxes and Enforcement Policies in Response to Tax Evasion

Monitoring and Productive Efficiency in Public and Private Firms

Fiscal policy and corruption

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