Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200330 
Year of Publication: 
2017
Series/Report no.: 
IFS Working Papers No. W17/08
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
We examine the optimal auditing problem of a tax authority when taxpayers can choose both to evade and avoid. For a convex penalty function the incentive-compatibility constraints may bind for the richest taxpayer and at a positive level of both evasion and avoidance. The audit function is non-increasing in reported income, and is higher for progressive tax functions than for regressive tax functions. Higher marginal tax rates increase the incentives for non-compliance, overturning the well-known Yitzhaki paradox.
Subjects: 
Tax avoidance
Tax evasion
Optimal auditing
Tax administration
JEL: 
H26
K42
D82
H21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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