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- Title
Tax Collection with Agency Costs: Private Contracting or Government Bureaucrats?
- Authors
Toma, Eugenia Froedge; Toma, Mark
- Abstract
Historically, governments contracted with private agents known as tax farmers to collect taxes. This paper develops a theoretical framework for determining when a welfare-maximizing government should choose tax farmers over bureaucratic tax collectors. While bureaucratic collectors have an incentive to shirk and raise collection costs above least costs, profit-maximizing private collectors tend to reduce tax evasion below the optimal level. Generally, the choice of collection methods depends on a comparison of the welfare loss associated with monitoring in the bureaucratic setting and the welfare loss associated with overdetection of evasion in the private setting.
- Subjects
TAX collection; TAX evasion; TAX shelters; FARMERS; AGRICULTURAL scientists; AGRICULTURE
- Publication
Economica, 1992, Vol 59, Issue 233, p107
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2555069