Optimal differential taxes and penalties
(1994) Public Finance and irregular activities : proceedings of the 49th Congress of the International Institute of Public Finance / ed. by W.W. Pommerehne — Location: Berlin, 1993
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- Abstract
- The purpose of this paper is to connect the literature of the economics of illegal activities with that of optimal income taxation. This leads to an optimal policy that dominates those suggested by either literature alone. The government uses a screening tax to let individuals reveal their characteristics, such as ability, and it imposes a fine-detection penalty structure to take care of possible cheaters. This policy might involve setting fines at their upper bound.
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Citations
Pestieau, P., Possen, U., & Slutsky, S. (1994). Optimal differential taxes and penalties. Public Finance, 49((suppl.)), 15-27. https://hdl.handle.net/2078.5/196586 (Original work published 1994)