Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries

Economica - Tập 83 Số 330 - Trang 219-246 - 2016
Henrik Jacobsen Kleven1, Claus Thustrup Kreiner2, Emmanuel Saez3
1London School of Economics,
2University of Copenhagen
3UC Berkeley

Tóm tắt

We develop an agency model explaining why third‐party information reporting by firms makes tax enforcement successful. While third‐party reporting would be ineffective with frictionless collusion between firms and employees, collusive evasion is impossible to sustain in firms with many employees and accurate business records as any single employee may reveal evasion. We embed our agency model into a macro model where the number of employees grows with development, showing that the tax take evolves as an S‐shape driven by changes in third‐party information. We show that our model is consistent with a set of stylized facts on taxation and development.

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