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2006

Law & Economics Working Papers Archive: 2003-2009

Taxation

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Optimal Tax Compliance And Penalties When The Law Is Uncertain, Kyle D. Logue Dec 2006

Optimal Tax Compliance And Penalties When The Law Is Uncertain, Kyle D. Logue

Law & Economics Working Papers Archive: 2003-2009

This Article examines the optimal level of tax compliance and the optimal penalty for noncompliance in circumstances in which the tax law is substantively uncertain – that is, when the precise application of the Internal Revenue Code to a particular situation is not clear. In such situations, two interesting questions arise: First, as a normative matter, how certain should a taxpayer be before she relies on a particular interpretation of a substantively uncertain tax rule? That is, if a particular position is not clearly prohibited, but neither is it clearly allowed, under the tax law, what is the appropriate threshold of ...