General equilibrium model with tax audit and endogenous choice between labour market and self-employment

The article discusses a general equilibrium model that describes the interaction of heterogeneous agents, who choose between the labor market and self-employment, and the state, which plays the role of an inspection body (auditor) in the model, which controls the fact of tax evasion. It is shown that in the case of asymmetric information, the tax rate that maximizes the amount of tax revenues increases. With the asymmetry of information, the Laffer curve approaches its counterpart with symmetric information if fines or the budget of the tax inspectorate are high. Despite the fact that in balance the amount of fines paid is zero, they have a significant impact on the amount of tax revenues. Being an efficient way of deterring tax violators, they increase the amount of tax collections at a slowing rate.