Tax Evasion and Tax Compliance

Franzoni, Luigi Alberto

doi:10.2139/ssrn.137430

Cited by 63 publications

(49 citation statements)

References 212 publications

(30 reference statements)

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“…Indeed, they insist taxpayers are also infl uenced by the social context in which, and the process by which, decisions are made; and they are motivated not simply by self-interests, but also by group notions like social norms, social customs, fairness, trust, reciprocity, tax morale, and even patriotism, as well as by individual notions of guilt, shame, morality, altruism, or alienation. Franzoni (1999) defi nes compliance with tax law as a decision, meaning four elements: (i) accurate tax base reporting, (ii) correct liability calculation, (iii) timely fi ling of tax statements, and (iv) timely payment of the amounts due.…”

Section: Introductionmentioning

confidence: 99%

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Impuesto al Valor Agregado: ¿Los mecanismos coercitivos mejoran el cumplimiento?

Ramirez-Zamudio¹

2015

Enfoque

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Value Added Tax (VAT) is one of the main sources of internal revenues in Peru and most countries in Latin America.Since the market in Peru shows a high heterogeneity in terms of fi rms' size and their economic transactions, it is not profi table to collect VAT from the smallest-sized fi rms or audit them. Therefore, there is a powerful incentive for evaders to create small-sized fi rms deliberately with the only aim of issuing invoices that do not support real transactions and selling them for a fraction of their nominal amount. Some big-sized fi rms "purchase" these invoices to overstate costs and reduce the VAT to be paid.Peru's Tax Administration Service (STA, for its acronym in Spanish) is a public agency in charge of the collection and audits on internal revenues, and the Detailed Transactions Report (DTR) is a VAT's enforcement mechanism aimed to fi ght against this kind of VAT evasion.The DTR is mandatory and the STA is able to impede commercial operations of any taxpayer that does not deliver it on time. However, since the number of small-sized fi rms in the market is large, but their average transactions are not considerable, the STA demands DTR only to big-sized fi rms.The objective of this article is to prove that a VAT's enforcement mechanism, partially sett led as in this case, becomes a perverse incentive for tax evaders to continue issuing and purchasing invoices that do not support real transactions.We propose that requiring all taxpayers to submit DTR under the VAT's scope, will discourage this kind of evasion since reporting the DTR implies collusion's costs and a higher risk of being bett er controlled or audited.

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Section: Introductionmentioning

confidence: 99%

“…If the list of taxpayers under VAT's scope is especially heterogeneous that most of them execute transactions for amounts that would not justify audits, and the STA cannot enforce regular VAT payments from all of them, at least three of the four elements mentioned by Franzoni (1999) to assure tax compliance, should not be considered.…”

Section: Introductionmentioning

confidence: 99%

Impuesto al Valor Agregado: ¿Los mecanismos coercitivos mejoran el cumplimiento?

Ramirez-Zamudio¹

2015

Enfoque

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“…3 When randomized audits are desirable, the 4 Such models have been formulated to study financial audits, insurance claim investigations, environmental regulation / pollution control, multilateral treaty monitoring, deterrence theory / law enforcement, optimal tax policy / tax compliance, etc. For example, (a) financial audits: Chatterjee, Morton, and Mukherji [2006] and minor modifications of Newman, Patterson, and Smith [2001] and Patterson and Noel [2003]; (b) insurance claim investigations: Mookherjee and Png [1989] and Picard [1996]; (c) environmental regulation / pollution control: Bontems and Bourgeon [2005] and minor modification of Florens and Foucher [1999]; (d) multilateral treaty monitoring: minor modifications of Avenhaus, von Stengel, and Zamir [2002] and Hohzaki [2007]; (e) deterrence theory / law enforcement: Kaplow and Shavell [1994], Polinsky and Shavell [1998;2000], and Polinsky [2007]; (f) optimal tax policy / tax compliance: Border and Sobel [1987], Sanchez and Sobel [1993], Cremer and Gahvari [1995], Sansing [1993], Rhoades [1997;1999], Mills and Sansing [2000], and Feltham and Paquette [2002].…”

Section: Introductionmentioning

confidence: 99%

Efficient Committed Budget for Implementing Target Audit Probability for Many Inspectees

Yim

2009

Management Science

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Abstract. Strategic models of auditor-inspectee interaction have neglected implementation details in multiple-inspectee settings. With multiple inspectees, the target audit probability derived from the standard analysis can be implemented with sampling plans differing in the budgets committed to support them. Overly-committed audit budgets tie up unneeded resources that could have been allocated for better uses. This paper studies the minimum committed budget required to implement a target audit probability when (i) the audit sample can be contingent on "red flags" due to signals of inspectees' private information (e.g., from self-reporting) and (ii) the number of inspectees is large. It proposes an audit rule called bounded simple random sampling (SRS), which is shown to require no more committed budget to support than two other rules naturally generalized from the one-to-one analysis. When the number of inspectees is large enough, bounded SRS is nearly as good as any efficient audit rule, which demands the lowest committed budget necessary to implement the target audit probability. The results offer insights on how audit sampling plans may be formulated to reduce inefficiency and what budget usage ratios should be expected accordingly. (JEL H26, M42, H72, C72, K34) KEYWORDS: Audit sampling plan, audit budget, tax audit, tax compliance, tax evasion, inspection game, appropriation and rescission.Author's Contacts. Postal: Department of Accountancy, Tilburg University, Warandelaan 2, 5037 AB Tilburg, The Netherlands. Phone: +31 13 466-2489. Fax: +31 13 466-8001. E-mail: andrew.yim@aya.yale.edu .Electronic copy available at: http://ssrn.com/abstract=1401910 Electronic copy available at: http://ssrn.com/abstract=1401910EFFICIENT COMMITTED BUDGET FOR IMPLEMENTING TARGET AUDIT PROBABILITY FOR MANY INSPECTEESAbstract. Strategic models of auditor-inspectee interaction have neglected implementation details in multiple-inspectee settings. With multiple inspectees, the target audit probability derived from the standard analysis can be implemented with sampling plans differing in the budgets committed to support them. Overly-committed audit budgets tie up unneeded resources that could have been allocated for better uses. This paper studies the minimum committed budget required to implement a target audit probability when (i) the audit sample can be contingent on "red flags" due to signals of inspectees' private information (e.g., from self-reporting) and (ii) the number of inspectees is large. It proposes an audit rule called bounded simple random sampling (SRS), which is shown to require no more committed budget to support than two other rules naturally generalized from the one-to-one analysis. When the number of inspectees is large enough, bounded SRS is nearly as good as any efficient audit rule, which demands the lowest committed budget necessary to implement the target audit probability. The results offer insights on how audit sampling plans may be formulated to reduce inefficiency and what budget usage ratios should ...

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“…Empirical findings suggest that noncompliance is not only a problem in developing countries, but also in developed countries. For instance, Kingston et al (1986) and Burgess (1992) show that in the United States overpayment of UI 5 Interesting recent surveys are provided by Andreoni et al (1998), Alm (1999), Franzoni (2000), Slemrod and Yitzhaki (2002) and Slemrod (2007).…”

mentioning

confidence: 99%

On the Economics of Contribution Evasion

Friehe¹,

Baumann²,

Jansen³

2009

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This paper considers the evasion of social security contributions, exemplified for unemployment insurance. It is established that critical differences between contribution evasion and tax evasion exist because contributions entitle to future claims. Furthermore, we derive a recommendation for the reduction of contribution evasion referring to the distinction between Bismarckian and Beverigean social security systems.

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Tax Evasion and Tax Compliance

Cited by 63 publications

References 212 publications

Impuesto al Valor Agregado: ¿Los mecanismos coercitivos mejoran el cumplimiento?

Impuesto al Valor Agregado: ¿Los mecanismos coercitivos mejoran el cumplimiento?

Efficient Committed Budget for Implementing Target Audit Probability for Many Inspectees

On the Economics of Contribution Evasion

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