Research Seminar on March 31, 2017

Topic: The Optimal Deterrence of Tax Evasion: The Trade-off Between Information Reporting and Audits
Speaker: Yulia Paramonova (HSE in St. Peterburg)
The workshop will take place at 3A Kantemirovskaya st., room 358 (3rd floor) at 16:50.

Abstract: Despite the widespread recognition of the effectiveness of information reporting to increase tax compliance, existing tax theory considers tax audits to be the only tool to prevent evasion. This paper extends tax theory by modeling information reporting as an additional enforcement instrument that allows a tax authority to acquire signals about taxpayers’ income. The paper rigorously characterizes the optimal strategy to maximiz e tax revenue when enforcement resources are limited. It determines the optimal allocation of resources between audits and information reporting, which is governed by how effectively the signals facilitate audi t targeting. The model demonstrates that the value of information reporting declines with audit coverag e because of the corresponding decline in the value of audit targeting. The optimal level of information reporting is an inverse U - s haped function of the budget allocated to enforcement, while the optimal audit coverage always increases with the budget. This finding implies that at some point it may not be optimal to expand information reporting .regulation. A desirable regulati on of payments requires public disclosure and allows contingent payments.

The aim of the seminar is to discuss the work in progress,
yours and others ideas, which can be interesting.

If you want to give a talk at the future seminars, please, contact Fedor Sandomirskiy: sandomirski@yandex.ru , +7(921)633-23-53