Assuming the government cannot fully observe either individual types or incomes and jointly picks optimal taxes and audit policies against evasion can significantly alter standard results from optimal income taxation and tax-evasion models, which treat these separately. We consider this when...

Governments often divide operations into separate branches that face different constraints and have limited information. Such separation is feasible if each can operate by solving a simple optimization problem using limited information without requiring game-theoretic calculations about others'...