Multitasking in Corporate Tax Evasion

Meyer-Brauns, Philipp

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Multitasking in Corporate Tax Evasion

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Meyer-Brauns, Philipp
Public Economics, MPI for Tax Law and Public Finance, Max Planck Society;

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2331969
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Citation

Meyer-Brauns, P. (2013). Multitasking in Corporate Tax Evasion. Working Paper of the Max Planck Institute for Tax Law and Public Finance, No. 2013-05.

Cite as: https://hdl.handle.net/11858/00-001M-0000-0015-2E72-0

Abstract

This paper analyzes firms' tax evasion behavior in a principal-agent model with multitasking. A generalist firm-owner hires a specialist tax manager who chooses the quantity as well as the quality of tax evasion. Higher quality lowers the firm's expected fine for tax evasion. In contrast to earlier literature, we find that asymmetric information inside firms may enhance the efficacy of tax enforcement. This occurs because highly sophisticated tax evasion activities are often difficult to understand and assess for the generalist shareholder, who commissions fewer such activities as a result of this informational disadvantage.