Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/328686 
Authors: 
Year of Publication: 
2023
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 11 [Issue:] 2 [Article No.:] 60 [Year:] 2023 [Pages:] 1-12
Publisher: 
MDPI, Basel
Abstract: 
This theoretical paper studies the relation between tax audits and labour market outcomes (job creation and unemployment) in an economy that contemplates penalties for firms that evade taxes and rewards for firms that comply with tax rules. Intuitively, the simultaneous presence of penalty and reward amplifies the role of auditing, since tax audits allow both punishing tax-evading firms and rewarding fiscally honest firms. Indeed, the presence of tax rewards can make the effect of tax audits on firms' net profits positive. However, the effect of tax audits on labour market outcomes is ambiguous. By setting the choice of optimal fiscal policy in a different and original way, this paper is able to derive a formula for the audit rate - consistent with the budget constraint - that makes the relation between tax audits and labour market outcomes positive.
Subjects: 
job creation
tax audits
tax evasion
tax reward
unemployment
JEL: 
H20
H26
H32
J64
M42
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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