cover image: Keeping it off the books

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Keeping it off the books

10 Nov 2003

The model leads to four propositions about the incidence of tax evasion: (1) the rate of return to evasion is positively related to the incidence of tax evasion; (2) individuals with higher risk aversion tend to evade less; (3) individuals with higher personal income tend to evade more; and (4) and compliance is positively related to the probability of being audited and the size of the penalty if [...] The majority of this work utilizes the basic framework of the Allingham-Sandmo (1972) model, but the key variation in these models is that they explore how the tax rate, probability of detection, and penalty rate affect the two choices of evasion and output.7. [...] In these models, it is found that: (1) reported sales decrease as the tax rate increases; (2) a rise in taxes increases the market price of the good, but by less than the amount of the tax, since some of the tax increase is absorbed through increased evasion; and (3) an increased probability of detection or penalty, increases the proportion of sales declared and the market price of the good. [...] The incentives of the CFO to engage in tax evasion are affected by the nature of the compensation arrangement. [...] Unfortunately, only Apel (1994) explored the relationship between tax non-compliance and the legal form of the business, largely due to the lack of information on the latter in the data employed by these studies.
government politics economy taxation corruption crime inflation tax evasion business business information corporations investments regression analysis tax government budget corporate tax business finance logistic regression regressions ols audits survey methodology adherence (medicine) logit model ordinary least squares regressors p-value maximum likelihood

Authors

Tedds, Lindsay M

Pages
49
Published in
Canada

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