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- Title
Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries.
- Authors
Kleven, Henrik Jacobsen; Kreiner, Claus Thustrup; Saez, Emmanuel
- Abstract
We develop an agency model explaining why third-party information reporting by firms makes tax enforcement successful. While third-party reporting would be ineffective with frictionless collusion between firms and employees, collusive evasion is impossible to sustain in firms with many employees and accurate business records as any single employee may reveal evasion. We embed our agency model into a macro model where the number of employees grows with development, showing that the tax take evolves as an S-shape driven by changes in third-party information. We show that our model is consistent with a set of stylized facts on taxation and development.
- Subjects
TAX enforcement; TAX evasion prevention; TAX research; TAXATION; TAXPAYER compliance; TAX collection
- Publication
Economica, 2016, Vol 83, Issue 330, p219
- ISSN
0013-0427
- Publication type
Article
- DOI
10.1111/ecca.12182