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/lp/de-gruyter/is-the-non-disclosure-policy-of-audit-intensity-always-effective-a-m05ZQEgXqz
- Publisher
- de Gruyter
- Copyright
- © 2022 Walter de Gruyter GmbH, Berlin/Boston
- ISSN
- 1935-1682
- eISSN
- 1935-1682
- DOI
- 10.1515/bejeap-2022-0163
- Publisher site
- See Article on Publisher Site
Abstract
AbstractThis study theoretically explores the effectiveness of the non-disclosure policy of audit intensity using the portfolio choice approach. In our setting, audit intensity follows a two-state Markov chain, which is not disclosed by the tax authority, and agents will exploit the available information to learn the state and accordingly make tax evasion decisions. We find that the effectiveness of the non-disclosure policy in reducing tax evasion and increasing tax revenues depends on the proportion of time in the high-intensity state. Interestingly, when this proportion is high during a period, the disclosure policy is more effective.
Journal
The B.E. Journal of Economic Analysis & Policy – de Gruyter
Published: Oct 1, 2022
Keywords: tax evasion; audits; non-disclosure policy; information learning