Discretionary Policy, Strategic Complementarity and Tax Evasion: A Strategic Analysis of the Italian Audit Mechanism
16 Pages Posted: 20 Apr 2010
Date Written: March 1, 2010
Underlying this work is the idea that there is a problem of strategic complementarity of individuals who choose to evade, which results from the discretionary policies of governments and the strategic implications of the Studi di Settore (Sector Studies), the mechanism used in Italy to evaluate the income (in reality, the turnover) of some professional categories and small firms. In the Italian case, policy discretion and the Sector Studies lead to a failure of the coordination mechanism of taxpayers and confer a strong advantage for the coordination mechanism of tax evaders. The outcome is a coordination failure where individuals converge to the least efficient equilibrium from a social perspective.
Keywords: Tax Evasion, Tax Compliance, Audit Selection Mechanism, Complementarity
JEL Classification: H26, C72
Suggested Citation: Suggested Citation