Multitasking in Corporate Tax Evasion

Abstract

This paper analyzes corporate tax evasion in a principal-agent model with multitasking. A firm-owner hires a specialist tax manager who chooses the quantity as well as the quality of tax evasion. Higher quality is a form of self-insurance and lowers the firm's expected fine for tax evasion. In contrast to earlier literature, we find that asymmetric information inside firms may enhance the efficacy of tax enforcement. This occurs because highly sophisticated tax evasion activities are often difficult to understand and assess for the non-specialist shareholder, who commissions fewer such activities as a result of this informational disadvantage.

Keywords: Corporate Tax Evasion, Principal-Agent Model, Tax Enforcement Policy, Multitasking

JEL Classification: H25, H26, D82