In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with a given taxpayer or activity and that taxpayer’s optimal declaration strategy with respect to fiscal agency. We also...

This paper deals with informal firms’ behavior regarding tax registration and compliance. Data from the Investment Climate Assessment (ICA) survey in Senegal, conducted by the World Bank in 2004, were used within a microeconometric framework. Results reveal that taxes owed by unregistered...

In a dynamic general equilibrium model with credit constraints and heterogeneous firms I show that both tax policies and domestic financial market development (FD) can lead to lower informality. Tax policies are more effective in reducing informality since they directly increase the cost of...