Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94332
Authors: 
Gang, Ira N.
Sanyal, Amal
Goswami, Omkar
Year of Publication: 
1998
Series/Report no.: 
Working Papers, Department of Economics, Rutgers, The State University of New Jersey 1996-04
Abstract: 
We introduce bureaucratic corruption in a simple way and examine its effect on government revenue when policies change. We show that a rise in the tax rate can lead to a fall in net revenue--a Laffer curve result due to the proportion of auditors that are corrupt and enforcement costs. It may pay for the government to lower audit probabilities and induce cheating. If corruption is low enough, revenues garnered from capturing people cheating may exceed those from choosing an audit structure in which everyone declares their true income. We also examine a case in which corruption is endogenous.
Subjects: 
auditing
bureaucracy
corruption
laffer curve
tax evasion
JEL: 
D73
H26
O23
Document Type: 
Working Paper

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