Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/176073 
Year of Publication: 
2011
Series/Report no.: 
Texto para discussão No. 590
Publisher: 
Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia, Rio de Janeiro
Abstract: 
I investigate the optimal auditing scheme for a revenue-maximizing tax-collection agency that observes not only reported pro ts, but also the level of employment at each firm. Each firm is owned by a single entrepreneur whose managerial ability is random. The optimal auditing scheme is discontinuous and non-monotone in ability. In intermediate audit costs, less-productive entrepreneurs face auditing probabilities that increase in ability, whereas the ablest ones are not audited. Finally, the effecive tax rate is higher in the middle of the managerial ability distribution; thus, the overall regressive (or progressive) bias that arises from evasion is unknown.
JEL: 
D21
H26
K42
Document Type: 
Working Paper

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