Skip to main content
Article thumbnail
Location of Repository

Whistle-blowers as a Deterrent to Tax Evasion

By Yosef Mealem, Yossef Tobol and Gideon Yaniv

Abstract

The economic literature on audit design has almost entirely ignored tax agencies' practical reliance on whistle-blowers for the successful conduct of tax investigations. The authors compare the tax agency's performance under a one-round blind-audit policy and a two-round whistle-blowing-intensive policy that invites whistle-blowers to blow the whistle on tax evaders who have escaped auditing in the first round. The authors show that if providing incentives for tax evasion is desirable under the one-round blind-audit scheme, the tax agency might be better off running a second, whistle-blowing-triggered, round, threatening to audit a sufficiently high fraction of the denounced evaders that will deter them from evading taxes. Hence, there will actually be no denouncing by honest whistle-blowers, who will find themselves serving as a deterrent to tax evasion without actually satisfying their desire for revenge or collecting a monetary reward. Committed to its threat, the tax agency will only be auditing falsely denounced non-evaders.tax evasion; whistle-blowers; tax agency; audit design

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://pfr.sagepub.com/content... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.