A Competitive Audit Selection Mechanism with Incomplete
Information

j 2019

A Competitive Audit Selection Mechanism with Incomplete Information

FIŠAR, Miloš, Ondřej KRČÁL, Jiří ŠPALEK, Rostislav STANĚK, James Christopher TREMEWAN et. al.

Základní údaje

Originální název

A Competitive Audit Selection Mechanism with Incomplete Information

Autoři

FIŠAR, Miloš, Ondřej KRČÁL, Jiří ŠPALEK, Rostislav STANĚK a James Christopher TREMEWAN

Vydání

MUNI ECON Working Papers, Brno, Masaryk University, 2019, 2571-130X

Další údaje

Jazyk

angličtina

Typ výsledku

Článek v odborném periodiku (nerecenzovaný)

Obor

50200 5.2 Economics and Business

Stát vydavatele

Česká republika

Utajení

není předmětem státního či obchodního tajemství

Odkazy

URL

Organizační jednotka

Ekonomicko-správní fakulta

Změněno: 30. 1. 2020 14:13, Ing. Miloš Fišar, Ph.D.

Anotace

V originále

The experimental tax and regulatory compliance literature has shown the effectiveness of competitive audit selection mechanisms (ASMs) based on declarations and a signal of the taxpayers' actual income. However, collecting information about actual income prior to audit selection is costly. In this article, we test the effectiveness of an endogenous ASM based solely on declared income. We show theoretically and in a laboratory experiment that this new endogenous ASM significantly increases compliance in comparison with an ASM where all taxpayers face audit with equal probability. However, a further consequence of conditioning solely on declared income is that poorer taxpayers are audited more frequently, reducing the effectiveness of this ASM in generating revenue and reducing inequality. We further compare the new mechanism with an ASM that also uses a noisy signal of actual income and show that it is a significant improvement over the other two ASMs in terms of compliance, revenue, and inequality. Our results suggest that ASMs that condition only on reported income can increase compliance but should be implemented with caution, and investing in acquiring information before audit selection can have substantial benefits.

Návaznosti

GA17-00496S, projekt VaV

Název: Vliv konkurenčních kontrolních mechanismů na dodržování daňových předpisů: experimentální přístup

Investor: Grantová agentura ČR, Tax Compliance with a Competitive Audit Selection Mechanism: An Experimental Approach

Citovat

FIŠAR, Miloš, Ondřej KRČÁL, Jiří ŠPALEK, Rostislav STANĚK a James Christopher TREMEWAN. A Competitive Audit Selection Mechanism with Incomplete Information. MUNI ECON Working Papers. Brno: Masaryk University, 2019, č. 8. ISSN 2571-130X.

@article{1614677,
   author = {Fišar, Miloš and Krčál, Ondřej and Špalek, Jiří and Staněk, Rostislav and Tremewan, James Christopher},
   article_location = {Brno},
   article_number = {8},
   language = {eng},
   issn = {2571-130X},
   journal = {MUNI ECON Working Papers},
   title = {A Competitive Audit Selection Mechanism with Incomplete Information},
   url = {https://ideas.repec.org/p/mub/wpaper/2019-08.html},
   year = {2019}
}

TY  - JFULL
ID  - 1614677
AU  - Fišar, Miloš - Krčál, Ondřej - Špalek, Jiří - Staněk, Rostislav - Tremewan, James Christopher
PY  - 2019
TI  - A Competitive Audit Selection Mechanism with Incomplete Information
JF  - MUNI ECON Working Papers
IS  - 8
PB  - Masaryk University
SN  - 2571130X
UR  - https://ideas.repec.org/p/mub/wpaper/2019-08.html
N2  - The experimental tax and regulatory compliance literature has shown the effectiveness of competitive audit selection mechanisms (ASMs) based on declarations and a signal of the taxpayers' actual income. However, collecting information about actual income prior to audit selection is costly. In this article, we test the effectiveness of an endogenous ASM based solely on declared income. We show theoretically and in a laboratory experiment that this new endogenous ASM significantly increases compliance in comparison with an ASM where all taxpayers face audit with equal probability. However, a further consequence of conditioning solely on declared income is that poorer taxpayers are audited more frequently, reducing the effectiveness of this ASM in generating revenue and reducing inequality. We further compare the new mechanism with an ASM that also uses a noisy signal of actual income and show that it is a significant improvement over the other two ASMs in terms of compliance, revenue, and inequality. Our results suggest that ASMs that condition only on reported income can increase compliance but should be implemented with caution, and investing in acquiring information before audit selection can have substantial benefits.
ER  -

FIŠAR, Miloš, Ondřej KRČÁL, Jiří ŠPALEK, Rostislav STANĚK a James Christopher TREMEWAN. A Competitive Audit Selection Mechanism with Incomplete Information. \textit{MUNI ECON Working Papers}. Brno: Masaryk University, 2019, č.~8. ISSN~2571-130X.

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