Tax compliance with endogenous audit selection and
heterogeneity of income

k 2019

Tax compliance with endogenous audit selection and heterogeneity of income

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

Basic information

Original name

Tax compliance with endogenous audit selection and heterogeneity of income

Authors

FIŠAR, Miloš (203 Czech Republic, belonging to the institution), Ondřej KRČÁL (203 Czech Republic, belonging to the institution), Jiří ŠPALEK (203 Czech Republic, belonging to the institution), Rostislav STANĚK (203 Czech Republic, belonging to the institution) and James Christopher TREMEWAN (554 New Zealand)

Edition

ESA WORLD MEETING, 2019

Other information

Language

English

Type of outcome

Prezentace na konferencích

Field of Study

50200 5.2 Economics and Business

Country of publisher

Canada

Confidentiality degree

není předmětem státního či obchodního tajemství

RIV identification code

RIV/00216224:14560/19:00108136

Organization unit

Faculty of Economics and Administration

Keywords in English

Tax compliance; Endogenous audit; Heterogeneous income

Abstract

V originále

It has been shown in the experimental tax compliance literature that endogenous audit selection mechanism (ASM) increases tax compliance. However, this literature assumes that the tax authority has an unbiased observation of the actual taxpayers' income and consequently the taxpayers with the largest difference between the observed and reported income are most likely to be selected for audit. In reality, the tax authority might not have unbiased information about the actual incomes as these might be observed only for taxpayers who have been selected for audit. In this case, the ASM can be based only on reported incomes. The aim of the paper is to design an endogenous ASM that uses only the reported incomes and experimentally compare the tax compliance under the endogenous and random ASMs. We develop a theoretical model where taxpayers have heterogeneous income and the ASM is based only on the reported income. We show that in the symmetric Bayes-Nash equilibrium the proposed endogenous ASM entails a higher reported income than the random ASM. We test predictions of the model in an economic experiment. Each experimental session consists of 30 rounds. In each round, subjects may be selected for audit with a certain audit probability. In the random ASM, the probability of audit is exogenous and the same for all taxpayers.

Links

GA17-00496S, research and development project

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

Investor: Czech Science Foundation

Citovat

FIŠAR, Miloš, Ondřej KRČÁL, Jiří ŠPALEK, Rostislav STANĚK and James Christopher TREMEWAN. Tax compliance with endogenous audit selection and heterogeneity of income. In ESA WORLD MEETING. 2019.

@proceedings{1614719,
   author = {Fišar, Miloš and Krčál, Ondřej and Špalek, Jiří and Staněk, Rostislav and Tremewan, James Christopher},
   booktitle = {ESA WORLD MEETING},
   keywords = {Tax compliance; Endogenous audit; Heterogeneous income},
   language = {eng},
   title = {Tax compliance with endogenous audit selection and heterogeneity of income},
   year = {2019}
}

TY  - CONF
ID  - 1614719
AU  - Fišar, Miloš - Krčál, Ondřej - Špalek, Jiří - Staněk, Rostislav - Tremewan, James Christopher
PY  - 2019
TI  - Tax compliance with endogenous audit selection and heterogeneity of income
KW  - Tax compliance
KW  - Endogenous audit
KW  - Heterogeneous income
N2  - It has been shown in the experimental tax compliance literature that endogenous audit selection mechanism (ASM) increases tax compliance. However, this literature assumes that the tax authority has an unbiased observation of the actual taxpayers' income and consequently the taxpayers with the largest difference between the observed and reported income are most likely to be selected for audit. In reality, the tax authority might not have unbiased information about the actual incomes as these might be observed only for taxpayers who have been selected for audit. In this case, the ASM can be based only on reported incomes. The aim of the paper is to design an endogenous ASM that uses only the reported incomes and experimentally compare the tax compliance under the endogenous and random ASMs. We develop a theoretical model where taxpayers have heterogeneous income and the ASM is based only on the reported income. We show that in the symmetric Bayes-Nash equilibrium the proposed endogenous ASM entails a higher reported income than the random ASM. We test predictions of the model in an economic experiment. Each experimental session consists of 30 rounds. In each round, subjects may be selected for audit with a certain audit probability. In the random ASM, the probability of audit is exogenous and the same for all taxpayers.
ER  -

FIŠAR, Miloš, Ondřej KRČÁL, Jiří ŠPALEK, Rostislav STANĚK and James Christopher TREMEWAN. Tax compliance with endogenous audit selection and heterogeneity of income. In \textit{ESA WORLD MEETING}. 2019.

Detailed Information on Publication Record