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ASPE Working
Paper Series
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Tax
Optimization under Tax Evasion: the
“Principal-Agent Approach”
Alexander Vasin, Polina Vasina
ASPE-Working Paper #02/2001
Issued in September 2001 |
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---- Abstract ----
The present paper considers a problem of optimal taxation for a group
of individuals
with random, independent and identically distributed incomes. An
agent’s income is her private information and can only be verified through a costly audit.
The purpose is to characterize the optimal tax schedule and auditing strategy that
maximize net tax revenue under participation constraints related to the interests of the
taxpayers. The authors determine the optimal evasion proof strategy, depending on the penalty
constraint. They show that under certain conditions tax evasion may increase net tax revenue, but
typically the optimal government strategy is evasion proof.
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This paper is available in PDF
(227 K) format. |
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