This paper analyzes the relation between tax auditing and fiscal equalization in the context of fiscal competition. We incorporate a model of tax evasion by firms into a standard tax competition framework where regional governments use their audit rates as a strategic instrument to engage in...

Governments and tax administrators around the world rely on the premise that audits will deter tax evasion. This Article presents experimental evidence that this premise may be, at least in part, misguided. Counterintuitively, I find that audits presented as random may induce taxpayers to cheat...

This paper extends the standard theoretical model of tax enforcement by allowing for the cross-matching of transactions in addition to the auditing of taxpayers. For the Value Added Tax (VAT) the matching of purchase and sales invoices is an important enforcement technique. The paper examines...

We consider a principal-agent model where the agent is a taxpayer and the principal is a tax authority. The principal wants to know the agent’s private information (e.g. emission or income) so that she can then assign a tax to the agent. It is mandatory for the taxpayer to report his...