The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement

The existing paradigm for the economic analysis of tax compliance provides an inadequate theory of the revenue collection process. Even as a purely economic model, its exclusive focus on individual taxpayers' decision-making promotes an unduly restrictive vision of the compliance problem and potential responses to it. In this paper we outline a more comprehensive theoretical basis for analyzing tax compliance, and illustrate it with a simple model. We believe our approach to be a significant improvement in the economic theory of law enforcement because it views the noncompliance problem as an interactive system. In our theoretical construct, individual decision-making not only depends upon and responds to the detection and punishment structure, but, unlike prior models, we also explicitly include the law enforcement agency--in this case the Internal Revenue Service--as an important interactive element. Initially we outline our general approach and its differences from the existing economic law enforcement paradigm. We then detail a simple model and its results and compare these results both to the prior literature and to some of our ongoing research in an effort to illustrate how our theoretical construct may affect predictions. Finally, we describe potential extensions of the model, examine its robustness with respect to various underlying assumptions and offer suggestions for further research, including possible applications to other law enforcement contexts

A Model of Tax Compliance Under Budget-Constrained Auditors

In the midst of various taxpayer "revolts" and federal budget deficits of unprecedented magnitude, noncompliance with federal and state income tax laws has become an issue of significant policy concern. If the IRS' budget is limited, the probability that any individual taxpayer will be audited depends on the behavior of other taxpayers. Thus the problem of compliance involves a "congestion" effect, which generates strategic interaction among taxpayers as well as between taxpayers and the IRS. This paper reflects an initial attempt to explore how the combination of a strategic IRS and asymmetric information affects the traditional theoretical results on tax compliance behavior

Expert Opinions and Taxpayer Compliance: A Strategic Analysis

In this paper we examine the incentives for taxpayers to claim risky deductions and to solicit expert opinions to support their positions, and for the tax agency to distinguish among individuals who do and do not solicit expert opinions for the purposes of auditing. We also consider the implications of an ex ante constraint on the tax agency which requires it to treat all taxpayers who take the deduction alike in terms of audit rates, whether or not they solicit an expert opinion. Finally, we examine the effects of regulations which limit the degree of riskiness for which a supporting opinion can be justified as well as the effects of changes in various penalty rates

Thermochemistry of Alane Complexes for Hydrogen Storage: A Theoretical and Experimental Comparison

Knowledge of the relative stabilities of alane (AlH3) complexes with electron donors is essential for identifying hydrogen storage materials for vehicular applications that can be regenerated by off-board methods; however, almost no thermodynamic data are available to make this assessment. To fill this gap, we employed the G4(MP2) method to determine heats of formation, entropies, and Gibbs free energies of formation for thirty-eight alane complexes with NH3-nRn (R = Me, Et; n = 0-3), pyridine, pyrazine, triethylenediamine (TEDA), quinuclidine, OH2-nRn (R = Me, Et; n = 0-2), dioxane, and tetrahydrofuran (THF). Monomer, bis, and selected dimer complex geometries were considered. Using these data, we computed the thermodynamics of the key formation and dehydrogenation reactions that would occur during hydrogen delivery and alane regeneration, from which trends in complex stability were identified. These predictions were tested by synthesizing six amine-alane complexes involving trimethylamine, triethylamine, dimethylethylamine, TEDA, quinuclidine, and hexamine, and obtaining upper limits of delta G for their formation from metallic aluminum. Combining these computational and experimental results, we establish a criterion for complex stability relevant to hydrogen storage that can be used to assess potential ligands prior to attempting synthesis of the alane complex. Based on this, we conclude that only a subset of the tertiary amine complexes considered and none of the ether complexes can be successfully formed by direct reaction with aluminum and regenerated in an alane-based hydrogen storage system.Comment: Accepted by the Journal of Physical Chemistry

Convergence of the Generalized Volume Averaging Method on a Convection-Diffusion Problem: A Spectral Perspective

A mixed formulation is proposed and analyzed mathematically for coupled convection-diffusion in heterogeneous medias. Transfer in solid parts driven by pure diffusion is coupled with convection-diffusion transfer in fluid parts. This study is carried out for translation-invariant geometries (general infinite cylinders) and unidirectional flows. This formulation brings to the fore a new convection-diffusion operator, the properties of which are mathematically studied: its symmetry is first shown using a suitable scalar product. It is proved to be self-adjoint with compact resolvent on a simple Hilbert space. Its spectrum is characterized as being composed of a double set of eigenvalues: one converging towards −∞ and the other towards +∞, thus resulting in a nonsectorial operator. The decomposition of the convection-diffusion problem into a generalized eigenvalue problem permits the reduction of the original three-dimensional problem into a two-dimensional one. Despite the operator being nonsectorial, a complete solution on the infinite cylinder, associated to a step change of the wall temperature at the origin, is exhibited with the help of the operator’s two sets of eigenvalues/eigenfunctions. On the computational point of view, a mixed variational formulation is naturally associated to the eigenvalue problem. Numerical illustrations are provided for axisymmetrical situations, the convergence of which is found to be consistent with the numerical discretization

White Lines and 3d-Occupancy for the 3d Transition-Metal Oxides

Electron energy-loss spectrometry was employed to measure the white lines at the L23 absorption edges of the 3d transition-metal oxides and lithium transition-metal oxides. The white-line ratio (L3/L2) was found to increase between d^0 and d^5 and decrease between d^5 and d^10, consistent with previous results for the transition metals and their oxides. The intensities of the white lines, normalized to the post-edge background, are linear for the 3d transition-metal oxides and lithium transition-metal oxides. An empirical correlation between normalized white-line intensity and 3d occupancy is established. It provides a method for measuring changes in the 3d-state occupancy. As an example, this empirical relationship is used to measure changes in the transition-metal valences of Li_{1-x}Ni_{0.8}Co_{0.2}O_2 in the range of 0 < x < 0.64. In these experiments the 3d occupancy of the nickel ion decreased upon lithium deintercalation, while the cobalt valence remained constant.Comment: 6 pages, 7 figure

A Model of Tax Compliance Under Budget-Constrained Auditors

In the midst of various taxpayer "revolts" and federal budget deficits of unprecedented magnitude, noncompliance with federal and state income tax laws has become an issue of significant policy concern. If the IRS' budget is limited, the probability that any individual taxpayer will be audited depends on the behavior of other taxpayers. Thus the problem of compliance involves a "congestion" effect, which generates strategic interaction among taxpayers as well as between taxpayers and the IRS. This paper reflects an initial attempt to explore how the combination of a strategic IRS and asymmetric information affects the traditional theoretical results on tax compliance behavior

The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement

The existing paradigm for the economic analysis of tax compliance provides an inadequate theory of the revenue collection process. Even as a purely economic model, its exclusive focus on individual taxpayers' decision-making promotes an unduly restrictive vision of the compliance problem and potential responses to it. In this paper we outline a more comprehensive theoretical basis for analyzing tax compliance, and illustrate it with a simple model. We believe our approach to be a significant improvement in the economic theory of law enforcement because it views the noncompliance problem as an interactive system. In our theoretical construct, individual decision-making not only depends upon and responds to the detection and punishment structure, but, unlike prior models, we also explicitly include the law enforcement agency--in this case the Internal Revenue Service--as an important interactive element. Initially we outline our general approach and its differences from the existing economic law enforcement paradigm. We then detail a simple model and its results and compare these results both to the prior literature and to some of our ongoing research in an effort to illustrate how our theoretical construct may affect predictions. Finally, we describe potential extensions of the model, examine its robustness with respect to various underlying assumptions and offer suggestions for further research, including possible applications to other law enforcement contexts

The tax compliance game: Toward an interactive theory of law enforcement

[No abstract