The Optimal Size of a Tax Collection Agency

24 Pages Posted: 16 Jul 2004

See all articles by Joel B. Slemrod

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Shlomo Yitzhaki

Hebrew University of Jerusalem - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 1985

Abstract

This paper addresses the optimal degree of law enforcement regarding tax evasion. It derives the conditions that characterize the optimal size of a tax collection agency, and then provides a simple interpretation of the conditions in terms of excess burden.The paper clarified earlier findings that suggest that the optimal size should be set higher than a simple cost-benefit calculation would indicate. It concludes with a numerical example that illustrates the optimality condition and demonstrates that a policy based on a naive cost-benefit analysis of the tax collection agency could result in a substantial overcommitment of resources.

Suggested Citation

Slemrod, Joel B. and Yitzhaki, Shlomo, The Optimal Size of a Tax Collection Agency (October 1985). NBER Working Paper No. w1759. Available at SSRN: https://ssrn.com/abstract=338815

Joel B. Slemrod (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

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Shlomo Yitzhaki

Hebrew University of Jerusalem - Department of Economics ( email )

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Israel
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+972 2 652 2319 (Fax)

National Bureau of Economic Research (NBER) ( email )

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United States

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