Abstract
This paper uses a game-theoretic model of the tax compliance game to estimate a model of audit selection and income tax underreporting in Jamaica. The empirical analysis make use of audited tax returns for individual taxpayers, and a random sample of tax returns for the population from which the audited returns are selected. The estimation results strongly indicate a nonrandom audit strategy, and thus provide support for the game-theoretic approach. The results also indicate that the probability of underreporting and the level of underreporting are positively related to the marginal tax rate and to income, and negatively related to marginal payroll tax benefits; in general, the underreporting elasticities are small.
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