Monitoring Expenditures on Tax Collection and Tax Evasion: The Case of Iran

he main aim of this paper is analyzing the relationship between tax evasion and the monitoring expenditure on tax collectionin Iran. For doing so, we have used a simulation model for determining optimal level of monitoring expenses on tax collection. The results showed that, a greater portion of government expenses must be allocated to monitor the tax collection, although do this reduces tax evasion, but have a negative effect on economic growth. Thus, instead of increasing monitoring expenses in line with reducing tax evasion, it is better to reduce taxes rate in a way that in addition not to decrease in motivation of economic agents activity, it also causes decrease in motivation of tax evasion.