A recent study by Finnish Centre of Excellence in Tax Systems Research investigates the drug prescriptions made by physicians in the private and public sector to treat high cholesterol and type two diabetes. The results are clear: physicians working in the private sector are significantly more likely to prescribe their patients expensive medication, even though there are more affordable approved alternatives available.
The keynote address given by Professor Joel Slemrod (University of Michigan) at the inaugural seminar of The Finnish Centre of Excellence in Tax Systems Research (FIT), University of Tampere, Finland, on September 1, 2022.
Tax policy design aims to vanish evasion incentives but can also affect agents’ occupational choices. Tax schemes, auditing, and the size of the IRS affect agents’ decisions, and the government must be aware of this. This article summarizes a study of the optimal tax policy design when evasion and occupational decision coexist.