Border, Kim C. and Sobel, Joel (1985) A Theory of Auditing and Plunder. Social Science Working Paper, 573. California Institute of Technology , Pasadena, CA. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20170915-144256949
![[img]](https://authors.library.caltech.edu/style/images/fileicons/application_pdf.png) |
PDF (sswp 573 - May 1985)
- Submitted Version
See Usage Policy. 874Kb |
Use this Persistent URL to link to this item: http://resolver.caltech.edu/CaltechAUTHORS:20170915-144256949
Abstract
Taxpayers know their income but the IRS does not. The IRS can audit taxpayers to discover their true income, but auditing is costly. We characterize optimal policies for the IRS when it is free to choose tax levies, audit probabilities and penalties. The main results are that optimal policies involve taxes which are monotonically increasing in reported incomes and audit probabilities are monotonically decreasing in reported income. In general optimal schemes involve stochastic auditing of reports and rebates for telling the truth. A theory of optimal plundering is described.
| Item Type: | Report or Paper (Discussion Paper) | ||||
|---|---|---|---|---|---|
| ORCID: |
| ||||
| Additional Information: | We thank the members of the UCSD and Caltech Theory Workshops for their comments and suggestions. Sobel happily thanks the National Science Foundation for partial support under grant SES-8408655. | ||||
| Group: | Social Science Working Papers | ||||
| Funders: |
| ||||
| Record Number: | CaltechAUTHORS:20170915-144256949 | ||||
| Persistent URL: | http://resolver.caltech.edu/CaltechAUTHORS:20170915-144256949 | ||||
| Usage Policy: | No commercial reproduction, distribution, display or performance rights in this work are provided. | ||||
| ID Code: | 81496 | ||||
| Collection: | CaltechAUTHORS | ||||
| Deposited By: | Jacquelyn Bussone | ||||
| Deposited On: | 15 Sep 2017 21:59 | ||||
| Last Modified: | 15 Sep 2017 21:59 |
Repository Staff Only: item control page
