Internal control versus external manipulation: a model of corporate income tax evasion

• 成果类型: Article
• 署名作者: Chen, KP; Chu, CYC
• 署名单位: National Taiwan University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• 发表日期: 2005
• 页码: 151-164
• 关键词: Collusion; taxation

摘要

We offer a formal model of corporate income tax evasion. While individual tax evasion is essentially a portfolio-selection problem, corporate income tax evasion is much more complicated. When the owner of a firm decides to evade taxes, not only does she risk being detected by the tax authorities, more importantly, the optimal compensation scheme offered to the employees will also be altered. Specifically, due to the illegal nature of tax evasion, the contract offered to the manager is necessarily incomplete. This creates a distortion in the manager's effort and reduces the efficiency of the contract. Tax evasion thus increases the profit retained by the firm not only at the risk of being detected, but also at the cost of efficiency loss in internal control.