Enforcement as Substance in Tax Compliance
Indiana University Maurer School of Law
Ted M. Sichelman
University of San Diego School of Law
May 6, 2013
70 Washington & Lee L. Rev. 1679 (2013)
San Diego Legal Studies Paper No. 13-117
Indiana Legal Studies Research Paper No. 236
It is well known that the government’s complete failure to enforce a law can nullify that law. But what are the effects of partial enforcement? This Article shows that imperfect enforcement can alter the de facto content of the written law in predictable and beneficial ways. Specifically, in the tax compliance context, even if perfect enforcement were costless, it would not always be socially optimal. When improving the substantive law is infeasible, the enforcement agency can effect beneficial changes in the law by adopting a probabilistic enforcement scheme that varies according to the category of taxpayer and type of transaction. Our model shows that properly “measuring” enforcement in this manner can increase overall social welfare without reducing tax revenues. Unlike case-by-case discretionary enforcement, which often results in costly uncertainty, measured enforcement operates via systemic, published policies that legal actors can respond to predictably. Accordingly, measured enforcement can offer substantial benefits not readily obtained through traditional lawmaking or enforcement schemes.
Number of Pages in PDF File: 71
Keywords: tax compliance, tax enforcement, probabilistic enforcement, uncertainty
JEL Classification: H2, H21, H26, K34, K42
Date posted: May 7, 2013 ; Last revised: November 4, 2013
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