Tax Compliance and Administration

Abstract

Tax evasion consists of illegal and intentional actions taken by individuals to reduce their legally due tax obligations. This chapter discusses the research on tax compliance and administration. The vast bulk of the theoretical work has attempted to introduce formally other factors thought to be relevant to the individual compliance decision. The standard administrative prescription for increased tax compliance comes directly and quickly from the basic model of individual choice. A factor intimately connected to enforcement efforts is the manner by which the tax agency selects tax returns for audit. There are many ways to select individual returns for a tax audit. Most evidence shows that a tax amnesty generates relatively small amounts of additional tax revenues, and seems to have relatively small effects on post amnesty compliance. All tax administrations exist to ensure compliance with the tax laws. This administrative dimension of taxation has long been recognized by tax administrators, especially those working on tax policy in developing countries.

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