Abstract
Auditor reward schemes based on detecting tax evasion fail because, if successful, they eliminate the source of rewards. However, rewards based on tax collection can retain an auditor's interest in the revenue. Although rewards based on tax collection compensate an auditor for bribes that could be earned by condoning evasion, we show that they do not exhaust all potential tax revenue. Furthermore, we demonstrate that increasing the hierarchy level of audit and limiting the reward to the top level only can increase the net revenue of the government. J. Comp. Econ., June 2002, 30(2), pp. 317–324. Lincoln University, Canterbury, New Zealand. © 2002 Association for Comparative Economic Studies. Published by Elsevier Science (USA). All rights reserved. Journal of Economic Literature Classification Numbers: D82, H26.
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