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An optimal tax audit mechanism: models and some evidences
DC Field | Value | Language |
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dc.contributor.author | Bahk, Jae Wan | - |
dc.date.accessioned | 2010-11-24T22:10:43Z | - |
dc.date.available | 2010-11-24T22:10:43Z | - |
dc.date.issued | 1992 | - |
dc.identifier.citation | Korean Journal of Policy Studies, Vol.7, pp. 55-72 | - |
dc.identifier.issn | 1225-5017 | - |
dc.identifier.uri | https://hdl.handle.net/10371/70429 | - |
dc.description.abstract | Since tax evasion, a moral hazard rooted in information asymmetry, causes inefficiency
as well as distorting income distribution, conscious policies are needed to abate its harm. However, policy measures are limited-the penalty for tax evasion is bounded above and monitoring resources are constrained. Focusing on the selfemployed, we thus explore how to design a socially optimal tax audit mechanism. With the 1989 Korean 'Family Income and Expenditure Survey,' we also examine: (1) tax payment factors; (2) the income tax gap between self-employed (SELF) households (HHs) and 'pay-as-you-earn' (PAYE) employee HHs; and (3) the effect of the tax audit rule on compliance. Though it saves audit resources and seizes evaders' risk premium, cutoff audit-currently adopted in Korea featuring 'reporting guidelines'-is shown to lower social welfare due to its built-in regressive bias. The line drawing hinders self-compliance as well. Endogenous audit with the audit chance declining in reported income without truncation is desirable for inequality-averse society. At least, the cutoff must be kept secret to taxpayers. The empirical analysis shows: (1) One-third of SELF HHs and 90% of temporary employees in the nonfarm sector are beyond tax enforcement; (2) SELF HHs pay less income tax than PAYE HHs by 46-60%, ceteris paribus, amounting to 18-30% of income tax collection. The tax gap widens with income.; (3) The elasticity of income tax payment to income is less than one for SELF HHs, conflicting with progressive taxation; (4) SELF HHs' elasticity is lower around their mean income than at tails. This reflects the adverse effect of cutoff audit; and (5) Tax enforcement is ineffective to capital income. | - |
dc.language.iso | en | - |
dc.publisher | Graduate School of Public Administration, Seoul National University | - |
dc.title | An optimal tax audit mechanism: models and some evidences | - |
dc.type | SNU Journal | - |
dc.contributor.AlternativeAuthor | 백재완 | - |
dc.citation.journaltitle | Korean Journal of Policy Studies | - |
dc.citation.endpage | 72 | - |
dc.citation.pages | 55-72 | - |
dc.citation.startpage | 55 | - |
dc.citation.volume | 7 | - |
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