scholarly journals An Optimal Tax Audit Mechanism: Models and Some Evidences

1992 ◽  
Vol 7 (0) ◽  
pp. 55-72
Author(s):  
Jae Wan Bahk
Keyword(s):  
Risk Premium ◽  
Tax Evasion ◽  
Income Tax ◽  
Family Income ◽  
Line Drawing ◽  
Tax Enforcement ◽  
Optimal Tax ◽  
Tax Gap ◽  
Tax Audit ◽  
The Empirical Analysis

Since tax evasion, a moral hazard rooted in information asymmetry, causes inefficiency as well as distorting income distribution, conscious policies are needed to abate its harm. However, policy measures are limited-the penalty for tax evasion is bounded above and monitoring resources are constrained. Focusing on the selfemployed, we thus explore how to design a socially optimal tax audit mechanism. With the 1989 Korean 'Family Income and Expenditure Survey,' we also examine: (1) tax payment factors; (2) the income tax gap between self-employed (SELF) households (HHs) and 'pay-as-you-earn' (PAYE) employee HHs; and (3) the effect of the tax audit rule on compliance. Though it saves audit resources and seizes evaders' risk premium, cutoff audit-currently adopted in Korea featuring 'reporting guidelines'-is shown to lower social welfare due to its built-in regressive bias. The line drawing hinders self-compliance as well. Endogenous audit with the audit chance declining in reported income without truncation is desirable for inequality-averse society. At least, the cutoff must be kept secret to taxpayers. The empirical analysis shows: (1) One-third of SELF HHs and 90% of temporary employees in the nonfarm sector are beyond tax enforcement; (2) SELF HHs pay less income tax than PAYE HHs by 46-60%, ceteris paribus, amounting to 18-30% of income tax collection. The tax gap widens with income.; (3) The elasticity of income tax payment to income is less than one for SELF HHs, conflicting with progressive taxation; (4) SELF HHs' elasticity is lower around their mean income than at tails. This reflects the adverse effect of cutoff audit; and (5) Tax enforcement is ineffective to capital income.

scholarly journals The Relative Tax Gap Hypothesis: An Exploratory Analysis and Application to U.S. Financial Markets

2020 ◽  
Vol 23 (1) ◽  
pp. 35-52
Author(s):  
Richard J. Cebula
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Tax Evasion ◽  
Income Tax ◽  
Real Interest Rate ◽  
Strong Support ◽  
Current Data ◽  
Data Availability ◽  
Ex Ante ◽  
Tax Gap

This study empirically investigates the “relative tax gap hypothesis,” which posits that the greater the size of the relative tax gap, the greater the degree to which the U.S. Treasury must borrow from domestic and/or other credit markets and hence the higher the ex ante real interest rate yield on the Bellwether 30 year U.S. Treasury bond. The study uses the most current data available for computing what is referred to here as the “relative tax gap,” which is the ratio of the aggregate tax gap (the loss in federal income tax revenue resulting from personal income tax evasion) to the GDP level. For each year of the study period, the nominal value of the tax gap is scaled by the nominal GDP level and expressed as a percentage. The study period runs from 1982 through 2016, reflecting data availability for all of the variables. The estimation results provide strong support for the hypothesis. In addition, in separate estimations, evidence is provided that the relative tax gap also acts to elevate the ex ante real interest rate yield on Moody’s Baa-rated long-term corporate bonds. It logically follows, then, that to the extent that a greater relative tax gap leads to higher ex ante real interest rates, it may contribute to the crowding out of corporate investment in new plant equipment associated heretofore with government budget deficits per se.

scholarly journals Indirect Auditing Methods for Individuals Subject to Income Tax

2020 ◽  
Author(s):  
Aggelos Zoitsas ◽  
Dimitrios Valsamidis ◽  
Theofilitsa Toptsi ◽  
Konstantina Tsoktouridou
Keyword(s):  
Factor Analysis ◽  
Tax Evasion ◽  
Income Tax ◽  
Chi Square ◽  
Tax Base ◽  
Indirect Methods ◽  
Bartlett’S Test ◽  
Legislative Framework ◽  
Tax Audit ◽  
The Relationship

This paper provides a tax audit guide, gathering all indirect audit methods applied both in Greece and abroad. It also identifies the size of hidden tax base and of the amounts that could be revealed and taxed. The aim of the current study is to present the indirect audit methods, as this is the imperative future of tax audits. Indirect methods are applied mainly to individuals, as according to experience, money that has escaped taxation, always ends up in one or more individuals. There are references in the ways in which this fact can be discovered during a tax audit, how to be determined and how understated income will be converted to taxable matter. Problems, opportunities, legislative framework and the overall impact of indirect audit methods are being analyzed in order to reduce tax evasion, in combination with an empirical research conducted as part of this study. A questionnaire that is consisting of 31 questions was completed by 102 tax-employees of the region of Macedonia and Thrace between May 2017 and September 2017. A factor analysis with the method of principal components and with varimax rotation was applied. The relationship among a number of items by grouping them in factors was investigated. Thus, four factors based on 21 questions of our questionnaire, are used for factor analysis. The Kaiser-Meyer-Olkin measure of sampling adequacy (KMO) value and chi-square value for Bartlett’s test of sphericity were checked whether data are suitable to continue the process of factor analysis. All statistical analysis is conducted with the application of the SPSS version 22 software package. Keywords: Indirect audit, methods, tax audit, income tax, tax evasion.

scholarly journals Criminal Enforcement and the IRS

1967 ◽  
Vol 13 (2) ◽  
pp. 352-355
Author(s):  
Robert L. Spatz
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
White Collar ◽  
Internal Revenue Service ◽  
Tax Burden ◽  
Fair Share ◽  
Tax Enforcement ◽  
Internal Revenue ◽  
Criminal Sanctions

This nation is run, essentially, by income tax collections, and the Internal Revenue Service painstakingly enforces criminal sanctions on would-be evaders. Tax evasion strikes more directly at the sovereignty, and less directly at individual citizens, than other white-collar crimes. The raison d' etre for vigorous crimi nal tax enforcement is to deter tax evasion and to assure the taxpaying public that each individual taxpayer is held account able for his fair share of the tax burden.

scholarly journals Pengaruh Penerapan Tarif Tunggal Pajak Penghasilan Badan terhadap Indikasi Penggelapan Pajak

2019 ◽  
Vol 19 (1) ◽  
pp. 96-117
Author(s):  
Bramastia Candra Putra ◽  
Riatu Mariatul Qibthiyyah
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Corporate Income Tax ◽  
Firm Level ◽  
Tax Rate ◽  
Empirical Results ◽  
Level Data ◽  
Sample Data ◽  
Firm Level Data ◽  
Tax Audit

This paper investigates the dierence eects of progressive rate and single rate implementation on corporate income tax to tax evasion indication. Using firm level data of tax audit results as a measure of tax evasion indication for six years observations. The empirical results from the sample data show that the implementation of single rate on corporate income tax reduces the tax evasion indication. In addition, the results show that the higher the marginal income tax rate, the higher the tax evasion indication. ======================== Paper ini menginvestigasi perbedaan pengaruh penerapan tarif pajak progresif dan tarif pajak tunggal pada Pajak Penghasilan (PPh) Badan terhadap indikasi penggelapan pajak. Paper ini menggunakan data hasil pemeriksaan pajak pada level perusahaan sebagai ukuran indikasi penggelapan pajak selama enam tahun observasi. Hasil studi empiris pada sampel data menunjukkan bahwa penerapan tarif pajak tunggal pada PPh Badan mengurangi tingkat indikasi penggelapan pajak. Selain itu, semakin tinggi tarif pajak penghasilan cenderung menstimulasi peningkatan indikasi penggelapan pajak.

scholarly journals Tax Audit as a Significant Factor in Suppressing Tax Evasion

2017 ◽  
Vol 55 (2) ◽  
pp. 161-178
Author(s):  
Miodrag Todorović ◽  
Ivan Stanković ◽  
Samir Ljajić
Keyword(s):  
Gross Domestic Product ◽  
Informal Economy ◽  
Tax Evasion ◽  
Income Tax ◽  
Arithmetic Operations ◽  
Tax System ◽  
The Public ◽  
Descriptive Research ◽  
Tax Audit ◽  
Public Revenue

AbstractThe fact that an enormous portion of the public revenue is lost through tax evasion indicates the inevitability of taking various measures to suppress it. According to the latest statistics, the outflow from the gross domestic product through tax evasion is 30%. The aim of this paper is to point to the systematisation of the matter relating to an assessment of the efficiency of tax audit as a pillar of the reduction of tax evasion and informal economy in our country. Methodology implies a descriptive research. Collected data were meticulously analysed by means of basic arithmetic operations. Due to serious consequences of tax evasion, it is necessary to upgrade the tax system modelled on developed market economies. It is necessary to modernise a Tax Administration, as well as to improve the co-operation between its segments. A synthetic income tax should be introduced. It would encompass all revenues that a taxpayer generates per year. If all taxpayers settled their tax liabilities, it would create space for tax burden reduction. In legal states only “the bravest” resort to tax evasion. Most countries have undertaken a series of measures in order to suppress tax evasion and informal economy. However, the effectiveness of the struggle varies.

scholarly journals The Role of Tax Audit in Reducing the Phenomenon of Tax Evasion and its Reflection on Tax Revenues

2018 ◽  
Vol 4 (4) ◽  
pp. 27
Author(s):  
Othman Abdulqader Hama Amin
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Applied Research ◽  
Tax System ◽  
Tax Revenues ◽  
Tax Audit ◽  
The Relationship

The purpose of this research is to explain the reality of tax auditing in reducing the phenomenon of tax evasion, by highlighting the most important reasons and factors that help in tax evasion.This research was carried out on a sample of companies operating in Iraq, which is an applied research based on the data of the General Authority for Taxation of these companies. The study concluded that the reasons for evasion of taxes are due to lack of tax awareness and lack of trust between taxpayers and the tax department, Thus enhancing the risk of tax evasion.The study recommended that: 1. Increase confidence between the tax department and taxpayers, and as a result, reduce tax evasion. 2. The necessity of this research lies in the development of a strategy for the tax system and the provision of a kind of equality between taxpayers and the tax department, which increases revenues, and gives credibility to the relationship between taxpayers and the income tax authority.

scholarly journals The Impact of Tax Audit and Corruption Perception on Tax Evasion

2021 ◽  
Vol 22 (3) ◽  
pp. 1158-1173
Author(s):  
Ferry Irawan ◽  
Adam Siaga Utama
Keyword(s):  
Tax Evasion ◽  
Tax Compliance ◽  
Fixed Effect Model ◽  
Tax Enforcement ◽  
Effect Model ◽  
Panel Data Regression ◽  
Data Regression ◽  
Tax Audit ◽  
Corruption Perception ◽  
The Impact

This study is aimed to determine the impact of tax audit intensity and perception of corruption on tax evasion activities. Some research that explains the impact of tax audit on tax evasion tends to give a varied result one and another. It is reasonable to assume that there is another factor that simultaneously influences tax evasion. Tax audit and perception of corruption were chosen because of their relevance and intertwine relation in tax authorities function and program, namely tax enforcement and the eradication of corruption. This research is also in line with the challenges faced by many countries in increasing tax compliance. We conduct a panel data regression method with a fixed effect model. We found that tax audit proved insignificant to tax evasion, and perception of corruption positively significant to tax evasion. We conclude that corruption significantly increases tax evasion and undermine the benefit of tax audit

scholarly journals ESTIMACIÓN DE LA BRECHA TRIBUTARIA PARA COLOMBIA: MEDIDAS PROACTIVAS PARA SU REDUCCIÓN

2021 ◽  
Vol 80 (317) ◽  
pp. 58
Author(s):  
Álvaro Andrés Vernazza Páez ◽  
A. Javier Prado Domínguez
Keyword(s):  
Tax Evasion ◽  
Latent Variables ◽  
Income Tax ◽  
Structural Equation ◽  
Equation Model ◽  
Tax Revenue ◽  
Tax Gap ◽  
Proactive Measures ◽  
The Impact ◽  
New Evidence

<p>Mediante el uso de un modelo de ecuaciones estructurales (SEM), en este artículo presentamos nueva evidencia de la sensibilidad de la brecha tributaria de Colombia a la evasión tributaria entre 1987 y 2018. Al formular tres variables latentes conexas a la evasión tributaria: 1) inestabilidad macroeconómica (<em>EIM</em>), 2) incumplimiento en el impuesto sobre la renta (<em>EIRC</em>) y 3) economía sumergida (<em>ESE</em>) se evidencia el impacto en el ingreso público tributario <em>(IPT)</em>, revelando la urgencia de proponer mecanismos proactivos que reduzcan la brecha tributaria (<em>BT</em>).</p><p align="center"><strong> </strong></p><p align="center">ESTIMATION OF COLOMBIA’S TAX GAP: PROACTIVE MEASURES TO REDUCE IT</p><p align="center"><strong>ABSTRACT</strong></p><p>Using a Structural Equation Model (SEM) new evidence of the sensitivity of tax gap in Colombia, as a consequence of tax evasion between 1970 and 2018, is here presented. While formulating three latent variables related to tax evasion: 1) macroeconomic instability (EIM), 2) non-compliance with income tax (EIRC) and 3) underground economy (ESE), the impact on public tax revenue (IPT) is shown, revealing the urgency of proposing proactive mechanisms to reduce the tax gap.</p>

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