TY - JOUR A1 - Traxler, Christian A1 - Stöwhase, Sven T1 - Tax Evasion and Auditing in a Federal Economy T2 - International Tax and Public Finance N2 - This paper analyzes the relation between tax auditing and fiscal equalization in the context of fiscal competition. We incorporate a model of tax evasion by firms into a standard tax competition framework where regional governments use their audit rates as a strategic instrument to engage in fiscal competition. We compare the region's choice of audit policies for three different cases: A scenario of unconfined competition without interregional transfers, a scenario with a gross revenue equalization (GRS) scheme and finally, a scenario with net revenue sharing (NRS), where not only the revenues from taxation but also the regions auditing costs are shared. Without regional transfers, fiscal competition leads to audit rates which are inefficiently low for revenue-maximizing governments. While in general GRS aggravates the inefficiency, NRS makes the decentralized choice of auditing policies more efficient. KW - tax evasion KW - fiscal competition KW - fiscal equalization KW - auditing Y1 - 2017 UR - https://opus4.kobv.de/opus4-hsog/frontdoor/index/index/docId/2164 SN - 0927-5940 VL - 12 IS - 4 SP - 515 EP - 531 PB - Kluwer Academic Publishers ER -