Plea bargaining with the IRS: extensions and further results

• 成果类型: Article
• 署名作者: Ueng, KLG; Yang, CC
• 署名单位: Academia Sinica - Taiwan; National Chi Nan University
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• 发表日期: 2001
• 页码: 83-98
• 关键词: plea bargaining; Tax evasion; Tax reform; optimal taxation

摘要

Chu [Journal of Public Economics, 41 (1990) 319-333] proposes a tax scheme called FATOTA, under which taxpayers are given the choice between paying a fixed amount of taxes and thus being exempted from tax audit, or paying only what taxpayers claim they owe and being subject to tax audits for possible evasion. In this paper we extend Chu's finding with regard to the Pareto-improving property of FATOTA to a more general setting, including nonlinear tax/penalty schedules, complicated audit rules, and endogenous labor supply. We also show that any tax system in which the highest-income taxpayer faces audit risk and/or tax distortion can be Pareto-improved upon by the introduction of FATOTA, We relate this result to Seade's [Journal of Public Economics, 7 (1977) 203-235] celebrated finding in the optimal taxation literature that any income tax schedule with a positive marginal tax rate at the top of the scale can be replaced by another tax schedule which is strictly Pareto-improving. (C) 2001 Elsevier Science B.V. All rights reserved.