Binary choice models

Is it possible to detect Tax Evasion using administrative data? A proposal based on a Binary Choice Model Affected by a Severe Censoring Mechanism

Tax evasion is a matter of huge concern for all countries as it undermines the public finance and can lead to a very inefficient resource allocation. Therefore it is of great interest to develop models that can help targeting the units (firms or individuals) at risk of noncompliance. Our focus is on a particular facet of tax evasion: undeclared work. We use an ad hoc data set by linking information on the inspections carried out in Italy in 2005 by the National Institute of Social Security on building and construction companies and a vast set of firms characteristics.

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