Audit Probability Versus Effectiveness: The Beckerian Approach Revisited
نویسنده
چکیده
The Beckerian approach to tax compliance examines how a tax authority can maximize social welfare by trading-off audit probability against the fine rate on undeclared tax. This paper offers an alternative examination of the privately optimal behavior of a tax authority tasked by government to maximize expected revenue. The tax authority is able to trade-off audit probability against audit effectiveness, but takes the fine rate as fixed in the short run. I find that the tax authority’s privately optimal audit strategy does not maximize voluntary compliance, and that voluntary compliance is non-monotonic as a function of the tax authority’s budget. Last, the tax authority’s privately optimal effective fine rate on undeclared tax does not exceed two at interior optima. JEL Classification: H26; D81; D63
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