The centre for tax analysis in developing countries

Overseas Development Institue Institue for Fiscal Studies

Tax audits under weak fiscal capacity

Should low-income countries leave discretion to tax inspectors to select firms for audit or should selection be determined by risk-scoring algorithms? Does the optimal amount of discretion depend on the quantity of third-party information available and its ease of access for tax inspectors? In a context with weak fiscal capacity, leveraging inspectors’ private information could be valuable but opens the door to discrimination and corruption.

This project tests which selection method (discretionary inspector selection or algorithm selection based on risk scores) is most effective in detecting firm non-compliance and increasing audit yield. An experiment in collaboration with the tax administration in Senegal is currently being implemented.


Published on: 13th September 2020

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