Journal of Tax Research

In Iran, taxes have a very minuscule share in government budget. The situation is very upsetting and it has very harmful consequences for the Iranian economy; for example sudden decrease in the government means as a result of the oil prices slump and embargoes which lead to a downturn in public services and public welfare, government borrowing from the central bank in order to pay for the deficit and very high and constant inflations which their burden are borne by the low income social groups and many other economic ailments. The question concerns how to increase the government’s tax revenues? In this study, we have tried to look at the importance of the issues regarding tax administration and also given the asymmetric information as to the income tax, and in order to prevent tax evasion phenomenon (and to increase government’s tax revenues without extending tax bases and increasing tax rates), to introduce a certain auditing mechanism and attempt to analyze it in a theoretical and experimental manner. We have made use of game theory and field study for that end.