Uncertainty And Taxpayer Compliance

. The complexity of both tax code provisions and tax forms could induce taxpayers to commit errors when they fill their income reports. The existence of these involuntary mistakes affects the tax enforcement policy as tax auditors will face now two sources of uncertainty, namely, the typical one associated with taxpayers' income and that associated with report errors. Moreover, the inspection policy can be exposed to some randomness due to audit cost uncertainty. The aim of this paper is to provide an unified framework to analyze the effects of all these sources of uncertainty. In this paper we provide an unified framework to analyze the effects of all these sources of uncertainty in a model of tax compliance where the interaction between auditors and taxpayers takes the form of a principal-agent relation. We show that more complexity in the tax code increases tax compliance. The effects of audit cost uncertainty are generally ambiguous. We also discuss the implications of our model for the regressive (or progressive) bias of the effective tax system.