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Concentrated Enforcement

67 Pages Posted: 13 Dec 2013 Last revised: 17 Oct 2014

Leigh Osofsky

University of Miami - School of Law

Date Written: February 28, 2014

Abstract

When enforcement resources are limited, how should the scarce enforcement resources be allocated to increase compliance with the law? The answer to this question can determine to what extent the law on the books translates to the law in practice. A dominant school of thought in the tax literature suggests that they should be allocated based on a “worst-first” method, whereby the individuals likely to be most noncompliant are targeted. However, while “worst-first” methods can encourage all individuals to increase compliance so as not to be deemed the “worst,” they can also provide cover to engage in noncompliance that is perceived moderate for the relevant population. This dynamic can become most problematic in highly noncompliant populations. In such populations, existing, high levels of noncompliance, and underlying, structural causes of the high noncompliance can serve as coordinating mechanisms, providing mutual assurance of low compliance. Moreover, “worst-first” theories do not provide a comprehensive explanation for the group and project-based enforcement practices that are found in a number of actual enforcement settings. In response to these deficits, I draw on work from across different disciplines to develop a new theory for the allocation of scarce tax enforcement resources. I suggest that, under certain conditions, deterrence can be enhanced by allocating scarce enforcement resources among a low-compliance population of taxpayers through a process I call concentrated enforcement. After setting forth the theoretical case for concentrated enforcement, I examine how it might apply in the cash business tax sector, a highly noncompliant sector that presents particular challenges for “worst-first” methods. I conclude that concentrated enforcement may increase compliance, meriting its application and empirical evaluation.

Keywords: tax enforcement

Suggested Citation

Osofsky, Leigh, Concentrated Enforcement (February 28, 2014). Florida Tax Review, Vol. 16, No. 6, 2014. Available at SSRN: https://ssrn.com/abstract=2366431 or http://dx.doi.org/10.2139/ssrn.2366431

Leigh Osofsky (Contact Author)

University of Miami - School of Law ( email )

P.O. Box 248087
Coral Gables, FL 33146
United States

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