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10 It is natural to think that α≥z as the punishment fee should at least cover the evaded taxes.
Raising the audit rate p l or the punishment fee α increases the wedge, ψ l =(1+p α+κ l )/(1+z).
Raising the audit rate p or the punishment fee α increases the wedge, ψ l =(1+p α+κ l )/(1+z).
From (40), it follows that an increase in the audit rate or the punishment fee, p or α, or an increase in the tax rate, z, will, for a given tax base, always increase government revenues.
The farmer's income help increase the overall household income, so the punishment fee for having "illegal" children can be paid, and thus, the community cultural norm of son preference becomes possible.
The parameter p is the auditing rate which captures the probability of being detected employing a worker in the informal sector and α is the associated firm punishment fee rate.
Similar(54)
It is often assumed that taxes and punishment fees are cheap government instruments whereas audits are costly to carry out.
However, it affects the welfare analysis as it tends to favour costless taxation and punishment fees at the expense of auditing.
This raises the question of whether it is possible or not to target the punishment fees and audit rates towards the sector employing manual vs highly educated workers.
The costs reduce the profitability of evading taxes and limit the size of the informal sector although the expected punishment fees are low relative to taxes.
These costs, both due to third-party reporting, or even morality, guilt, or shame, tend to reduce the profitability of evading taxes and limit the size of the informal sector, although the expected punishment fees are low relative to taxes.
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