Lipatov, Vilen (2003): Evolution of Tax Evasion.
Download (353Kb) | Preview
In this paper we analyze a tax evasion game with taxpayer learning by imitation. If the authority commits to a fixed auditing probability, a positive share of cheating is obtained in equilibrium. This stands in contrast to the existing literature that yields full compliance of audited taxpayer who are rational, have a lot of information and thus do not need to interact. When the authority adjusts auditing probability every period, cycling in cheating-auditing occurs. Thus, the real life phenomenon of compliance fluctuations is explained within the model rather than by exogenous parameter shifts.
|Item Type:||MPRA Paper|
|Institution:||European University Institute|
|Original Title:||Evolution of Tax Evasion|
|Keywords:||tax evasion; imitation; learning|
|Subjects:||C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
|Depositing User:||Vilen Lipatov|
|Date Deposited:||29. Nov 2006|
|Last Modified:||11. Feb 2013 21:23|
 Jame Andreoni, Brian Erard and Jonathan Fein tein. Tax Compliance. Journal of Economic Literature, June 1998, pp. 818-860.  Peter Bardsley. Tax compliance game with imperfect auditing. The univer ity of Melbourne Department of economic re earch paper no.548. January 1997.  Charle Clotfelter. Tax Eva ion and Tax Rate : an Analy i of Individual Re-turn . Revie of Economic and Stati tic , 65(3), pp. 363-73, 1983.  Frank Cowell. The Economic of Tax Eva ion, MIT Pre , 1990.  Ro Cre man, William Morri on and Jean-Françoi Wen. On the Evolutionary Dynamic of Crime. Canadian Journal of Economic , vol. 31, no. 5, November 1998.  Jeffrey Dubin, Michael Graetz and Loui Wilde. The Effect of Audit Rate on the Federal Individual Income Tax, 1977-1986. National Tax Journal, 43(4), pp. 395-409, 1990.  Eduardo Engel, Jame Hine . Under tanding Tax Eva ion Dynamic . NBER Working Paper No. 6903, January 1999.  Brian Erard and Jonathan Fein tein. Hone ty and Eva ion in the Tax Compliance Game. Rand Journal of Economic , 25(1), pp. 1-19, 1994.  Dre Fudenberg and David Levine. The theory of learning in game . MIT Pre , 1998.  David Gile and Patrick Caragata. The learning path of the hidden economy: the tax burden and the tax eva ion in Ne Zealand. Econometric Working Paper 9904, Department of economic , Univer ity of Victoria, Canada.  Michael Graetz, Jennifer Reinganum and Loui Wilde. The Tax Compliance Game: To ard an Interactive Theory of La Enforcement. Journal of La , Economic and Organization, 2(1), pp. 1-32, 1986.  Morri Hir ch and Stephen Smale. Differential equation , dynamical y tem , and linear algebra. Ne York : Academic Pre , 1974.  Jo ef Hofbauer and Karl Schlag. Sophi ticated Imitation in Cyclic Game . Jour-nal of Evolutionary Economic , 10, pp.523-543, 2000.  J. Poterba. Tax Eva ion and Capital Gain Taxation. American Economic Re-vie , Paper and Proceeding , 77, pp. 234-39, 1987.  Jenifer Reinganum and Loui Wilde. Equilibrium Verification and Reporting Policie in a Model of Tax Compliance. International Economic Revie , 27(3), pp. 739-60, 1986.  Isabel Sánchez and Joel Sobel. Hierarchical De ign and Enforcement of Income Tax Policie . Journal of Public Economic , 50(3), pp. 345-69, 1993.  Karl Schlag. Why Imitate, and If So, Ho ? A Boundedly Rational Approach to Multi-armed Bandit . Journal of Economic Theory 78, pp.130-56, 1998.  Schlag K.H.; Pollock G.B. Social Role a an Effective Learning Mechani m. Rationality and Society, vol. 11, i . 4, pp. 371-397, November 1999.  Joel Slemrod. The Economic of Corporate Tax Selfi hne . NBER Working Pa-per #10858, October 2004.  Joel Slemrod and S. Yitzhaki. Tax Avoidance, Eva ion and Admini tration. Handbook of Public Economic , volume 3, 1423-1470, North Holland, 2002.  Friedrich Schneider and Dominik En te. Shado Economie : Size, Cau e , and Concequence . Journal of Economic Literature, pp.77-114. March 2000.  Alexander Va in and Polina Va ina. Tax Optimization under Tax Eva ion: The Role of Penalty Con traint . EERC Working Paper 01/09E, 2002.  Waly Wane. Tax eva ion, corruption, and the remuneration of heterogeneou in pector . World Bank Working Paper 2394, 2000.  A. Witte and D. Woodbury. The Effect of Tax La and Tax Admini tration on Tax Compliance. National Tax Journal, 38, pp.1-13, 1985.