Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82135
Authors: 
Boserup, Simon Halphen
Pinje, Jori Veng
Year of Publication: 
2010
Series/Report no.: 
EPRU Working Paper Series 2010-13
Abstract: 
A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in effective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency's use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.
JEL: 
D82
H26
K42
Document Type: 
Working Paper

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