Modernization of Tax Administrations and Optimal Fiscal Policies

Journal of Public Economic Theory, Forthcoming

31 Pages Posted: 8 Jul 2009

See all articles by Martin Besfamille

Martin Besfamille

Instituto de Economía, Pontificia Universidad Católica de Chile

Cecilia Parlatore

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Date Written: February 6, 2009

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.

Keywords: Tax administration,Tax rates,Tax evasion, Enforcement, Audit costs

JEL Classification: D82, H26, H83

Suggested Citation

Besfamille, Martin and Parlatore, Cecilia, Modernization of Tax Administrations and Optimal Fiscal Policies (February 6, 2009). Journal of Public Economic Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1430491

Martin Besfamille (Contact Author)

Instituto de Economía, Pontificia Universidad Católica de Chile ( email )

Casilla 76
Correo 17
Santiago
Chile
++56 2 2354 7105 (Phone)

Cecilia Parlatore

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://www.ceciliaparlatore.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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