TY - UNPB

T1 - Tax Evasion, Information Reporting, and the Regressive Bias Prediction

AU - Boserup, Simon Halphen

AU - Pinje, Jori Veng

PY - 2013

Y1 - 2013

N2 - Models of rational tax evasion and optimal enforcement invariably predict a regressive bias in the effective tax system, which reduces redistribution in the economy. Using Danish administrative data, we show that a calibrated structural model of this type replicates moments and correlations of tax evasion and audit probabilities once we account for information reporting in the tax compliance game. When conditioning on information reporting, we find that both reduced-form evidence and simulations exhibit the predicted regressive bias. However, in the overall economy, this bias is negated by the tax agency's use of information reports and revenue-maximizing disposition of audit resources.

AB - Models of rational tax evasion and optimal enforcement invariably predict a regressive bias in the effective tax system, which reduces redistribution in the economy. Using Danish administrative data, we show that a calibrated structural model of this type replicates moments and correlations of tax evasion and audit probabilities once we account for information reporting in the tax compliance game. When conditioning on information reporting, we find that both reduced-form evidence and simulations exhibit the predicted regressive bias. However, in the overall economy, this bias is negated by the tax agency's use of information reports and revenue-maximizing disposition of audit resources.

M3 - Working paper

BT - Tax Evasion, Information Reporting, and the Regressive Bias Prediction

ER -