Faculty of Economics and Business Administration Publications Database

Corporate tax evasion: The case for specialists

Volume: 81
Number: 1
Pages: 185 - 206
Month: January
ISSN-Print: 0167-2681
Link External Source: Online Version
Year: 2012
Keywords: Tax evasion; Tax avoidance; Tax compliance; Sophisticated evasion
Abstract: We analyze the role of accounting specialists who help corporations evade/avoid taxes in a game of incomplete information played by a tax authority, corporate taxpayers, and an accounting specialist. In addition to a full equilibrium characterization, we establish that (i) marginal changes in enforcement are not effective when evasion/avoidance is pervasive; (ii) fines on firms as opposed to specialists are more effective in such situations; (iii) reducing auditing costs and increasing “creative accounting” costs are effective in curbing evasion when tax compliance is relatively high.