Modernization of Tax Administrations and Optimal Fiscal Policies
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Finance Papers
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Economic Theory
Finance
Finance and Financial Management
Taxation
Finance
Finance and Financial Management
Taxation
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Besfamille, Martin
Parlatore Siritto, Cecilia
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Abstract
Since Sandmo (1981), many articles have analyzed optimal fiscal policies in economies with tax evasion. All share a feature: they assume that the cost of enforcing the tax law is exogenous. However, governments often invest resources to reduce these enforcement costs. In a very simple model, we incorporate such investments in the analysis of an optimal fiscal policy. We characterize their optimal level and we show numerically how they interact with the other dimensions of the optimal fiscal policy. Finally, we highlight the differences between our results and those obtained in a model without investment in the tax administration.
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2009-01-01
Journal title
Journal of Public Economic Theory