Dr Matthew Rablen awarded ESRC grant
Dr Matthew Rablen has been awarded £213,000 as part of the prestigious ESRC Research Leaders of the Future scheme. The Brunel lecturer from the Department of Economics and Finance will investigate the optimal design of a portfolio of audit interventions for a tax authority.
Tax evasion is an important economic and social phenomenon. The most recent HMRC estimate of the tax gap places it in the region of £40 billion, which is about 8% of total tax liability. As part of their enforcement operations, tax authorities currently implement a portfolio of taxpayer audits. The British tax authority, HMRC, is currently considering introducing a new category of ‘light-touch’ audit to complement the more rigorous audit types it has traditionally implemented.
Dr Rablen’s research will centre upon how the tax authority should optimally design a portfolio of intervention types so as to maximise expected tax revenue. Issues such as the trade-off between targeting and coverage, and between audit effectiveness and probability will all have to be considered.
“The academic literature is yet to properly understand how a portfolio of audit types should be constructed, so it is my objective to construct a scientifically sound analysis. This will be validated, at least in part, by the publication of high quality papers in good journals.”
The proposed research project will take two years to complete. A mixture of insights from game theory and behavioural economics will be applied to identify the most effective way for a tax authority to design a portfolio of interventions.
“The exercise involves using game theoretic models and computer simulations of behaviour within taxpayer networks. The analysis will centre on the strategic interaction between taxpayers and the tax authority – how taxpayers will respond to a given intervention, and, given that, how the tax authority should optimally design a portfolio of intervention types so as to maximise expected tax revenue.”
Once completed, Dr Rablen’s research will provide a rich framework that many tax authorities looking to improve their compliance operations will be able to use. For instance, HMRC are currently appraising an option to introduce a new ‘light-touch’ audit type. They are also seeking expert academic input to optimise the design of a relatively new area of enforcement: targeted campaigns. The proposal has been carefully tailored to address both of these current issues.”
More information about Dr Matthew Rablen and his research can be found on his profile page.