In a two-country model, the citizens of a ‘big home country’ can either fictitiously move residence to a ‘small foreign country’ where residence-based taxes are lower (external avoidance), or under-report the tax base at home (internal avoidance). The home and the foreign government compete on tax rates, with the former also setting two types of administration policies, each one targeting one type of tax avoidance. Although tax revenue is maximized by employing both types of administration policies, the optimal policy faces a tradeoff in terms of fiscal outcomes: in fiscal environments with large intrinsic opportunities of tax avoidance, internal avoidance increases and external avoidance decreases, while the reverse occurs in environments with small opportunities.