Deriving the Expected Value of the Tax Underreporting Rate

2 Journal on Policy & Complex Systems 4 (2015)

Texas A&M University School of Law Legal Studies Research Paper No. 16-73

12 Pages Posted: 28 Jul 2015 Last revised: 8 Nov 2016

See all articles by Jack Manhire

Jack Manhire

Texas A&M University School of Innovation; Bush School of Government & Public Service

Date Written: 2015

Abstract

The principal purpose of this paper is to derive an expected value measure of the tax underreporting rate given only tax authority enforcement data. The main result is that the expected value measure of the underreporting rate is a modified geometric mean function of the audit rate and the proportion of audited returns found to contain underreported tax. This result hopefully allows agent-based model designers to create more valid models that explain the macro-level properties of tax compliance. This, in turn, should allow policymakers to be more certain in their political decisions on tax policy.

Keywords: tax, tax compliance, tax avaidance, underreporting, tax audit, complex systems

JEL Classification: E62, H2, H21, H24, H25, H26, H71, K34

Suggested Citation

Manhire, Jack, Deriving the Expected Value of the Tax Underreporting Rate (2015). 2 Journal on Policy & Complex Systems 4 (2015), Texas A&M University School of Law Legal Studies Research Paper No. 16-73, Available at SSRN: https://ssrn.com/abstract=2636390

Jack Manhire (Contact Author)

Texas A&M University School of Innovation

1249 TAMU
College Station, TX 77843-1249
United States

Bush School of Government & Public Service ( email )

4220 TAMU
College Station, TX 76845
United States

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