The role of tax preparers in tax compliance

This paper assesses the influence of tax preparers on tax compliance. Using data from the Internal Revenue Service's (IRS) Taxpayer Compliance Measurement Program and an index of legal ambiguity based on Revenue Rulings, the impact of preparation mode (paid third party vs. self) on compliance at the level of the return line item is probed. The results suggest that preparers contribute to compliance by enforcing legally clear requirements but also contribute to noncompliance, as measured by the IRS, by helping taxpayers take advantage of legal ambiguity. Furthermore, an analysis of a campaign to enforce estimated tax requirements conducted by the Pennsylvania Department of Revenue suggests that tax preparers are also an important network for communicating tax agency enforcement priorities to taxpayers.An earlier version of this paper was prepared for the conference on Federal/State Research sponsored by the U.S. Internal Revenue Service.     

Benchmarking tax systems

International institutions, such as the World Bank, the International Monetary Fund and the U.S. Agency for International Development, have been assessing tax system performance and capabilities for decades without having a solid international comparator basis for undertaking these assessments. This article provides a series of indicators and benchmarks that can help to put such assessments into an international perspective, set specific targets for performance, reform and modernisation, and monitor progress over time. Copyright © 2005 John Wiley & Sons, Ltd.     

Tax rates, tax administration and income tax evasion in Switzerland

This paper contains an empirical analysis of income tax noncompliance in Switzerland, based on the standard model of tax evasion. Noncompliance is found to be positively related to the marginal tax burden and negatively to the probability of audit, though the latter impact is only weak. There is no evidence of a significant deterrent effect of the penalty tax. The extended model reveals that noncompliance is positively related to inflation. Finally, noncompliance is significantly lower when citizens/taxpayers have direct control over government budgets, whereas the opposite holds when there is no such control.     

Redistribution tax under non-benevolent governments

I analyze redistribution policies of majority governments in one kind of representative voting system. I employ these assumptions: members gain special benefits in the majority; parties act strategically by using redistribution transfers; the member's utility function is given in a quasi-linear function; the government's objective functions are the weighted summation of utilities and I classify governments according to the weight. The four main results are: a stable majority dose not support myopic government; the stable redistribution policy of benevolent government is expressed by a scope of transfers; the stable transfer of non-benevolent governments depends on private utilities of the majority and opportunity costs of the minority; and the altruistic government is not displayed by any other majority, because it offers the total welfare of the majority to the minority as a subsidy.     

Voting on income tax exemptions

Most itemized tax exemptions lead to significant deductions for a minority of the population only. This raises the question why the majority does not vote for the abolition of these tax privileges in exchange for lower tax rates. In this paper we show that a reform proposal may be voted down, even when the majority uses the exemption at stake below the average. Turning to an empirical application, we simulate the voting outcome on the proposal to abolish the tax deductibility of commuting expenses in Germany. Our model predicts that this proposal would be rejected, even though a comfortable majority has below-average deductions.     

Tax systems and tax shares

Public Choice - How can one use the results derived in Sections 3 and 4? The type of use one can make in theoretical voting analysis was suggested in Section 4 already. Comparative statics results...     

Progressive taxation and tax morale

Due to strong evidence indicating that tax morale affects actual tax-paying behavior, finding the determinants of tax morale could help both to understand and to fight tax evasion. In this paper we analyze the effect of progressive taxation on individual tax morale using a cross-country approach—a research question that has not been investigated in the existing literature. Our theoretical analysis leads to two testable predictions. First, an individual’s tax morale is higher, the more progressive the tax schedule is. Second, the positive impact of tax progressivity on tax morale declines with income. In our empirical analysis we make use of a unique dataset of tax progressivity measures, namely the World Tax Indicators, and follow most of the tax morale literature by employing the World Values Survey to measure individual tax morale. Controlling for a wide range of potential confounders, we are able to confirm both hypotheses in our empirical analysis.     

Interstate tax competition after TRA86

When a governor announces that a tax increase is necessary, how do voters decide whether the governor is representing the situation honestly, or just preparing to line his or her pockets? This paper presents evidence that voters may look at the tax increases in neighboring states to obtain information on whether a tax increase is appropriate and, using this information, decide whether to reelect their governor. The data suggest that comparisons with neighbors influence gubernatorial behavior: Governors are more likely to raise taxes when neighbors are doing the same. TRA86 allows us an extra check on the rnodelpresented: I f the marginal dollar taken in state taxes is more costly to state residents, this may increase the extent to which residents use information provided through neighboring states to sort good governors from bad.