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2016-02

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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/108982

Optimal income tax enforcement under prospect theory

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Abstract

Prospect Theory (PT) has become the most accepted alternative to Expected Utility Theory (EUT) as a theory of decision under uncertainty. This paper extends the existing literature on efficient tax and audit schemes, by answering the question as to just how progressive an efficient tax system can be when assuming that taxpayers behave in line with the tenets of PT. Under reasonable assumptions regarding the reference income and the value function of taxpayers, we show that the efficient tax schedule is regressive while audit probabilities are non-increasing in the declared income. These results are consistent with the previous literature on EUT

Related resource

https://doi.org/10.1111/jpet.12143

Subject

Frau fiscal, Frau de llei, Impostos sobre la renda, Perspectiva, Control de gestió

Subject (English)

Tax evasion, Evasion of the law, Income tax, Perspective, Management audit

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Articles publicats en revistes (Economia)

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PIOLATTO, Amedeo and TROTIN, Gwenola. Optimal income tax enforcement under prospect theory. Journal of Public Economic Theory. 2016. Vol. 18, num. 1, pags. 29-41. ISSN 1097-3923. [consulted: 10 of October of 2026]. Available at: https://hdl.handle.net/2445/108982

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