The Study Of Optimal Audit Policy And An Economic Analysis Of Tax Evasion

The paper will review the theory on tax evasion home and abroad briefly. Also, we shall evaluate recent results simply. According to the actual condition in China, this paper estimates the scale of tax evasion resulted from underground and overground economies respectively with the method of cash ratio method and taxation potential method. Since we have figured out overall amount of tax evasion, it is time for us to do further research into the relationship between tax evasion and economic growth. At the same time, the paper examines the effect of different type of tax evasion on GDP, income distribution and labor supply. After that, we arrive at the conclusion that overground tax evasion exerts a different influence on economics compared with underground tax evasion. We also analyze the reason of it. With a comparative static game model, we come to the conclusions as follows: The amount of tax evasion is negative to degree of punishment, discount factor and supervision probability of the government, while it is positive to tax rate. As for degree of taxation supervision, it is negative to degree of punishment, square of discount factor and cost of government supervision, while it is positive to square of tax rate. Optimal taxation supervision doesn't mean stopping tax evasion from happening. Therefore, the only feasible measure for the government is to strengthen the timing of supervision for taxpayers with short-term interest. For taxpayers with long-term interest, it is necessary to strengthen the intensity of supervision. This paper divides enterprises into three categories, namely taxpayers with short-term interest, taxpayers with long-term interest and taxpayers who obey the tax law. We also put forward several suggestions, such as improving the timing of supervision, strengthening the degree of punishment, and perfecting the tax system.