This paper sets out a framework for analyzing optimal interventions by a tax administration, one
that parallels and can be closely integrated with established frameworks for thinking about
optimal tax policy. Its key contribution is the development of a summary measure of the impact
of administrative interventions—the “enforcement elasticity of tax revenue”—that is a sufficient
statistic for the behavioral response to such interventions, much as the elasticity of taxable
income serves as a sufficient statistic for the response to tax rates. Amongst the applications are
characterizations of the optimal balance between policy and administrative measures, and of the
optimal compliance gap.
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