Tax burden optimization on economic agents by modeling interaction in the taxation system

Sokolovskyi, Dmytro and Sokolovska, Olena (2016): Tax burden optimization on economic agents by modeling interaction in the taxation system.

Abstract

This paper aims to propose the approach to classify the industries in terms of easiness of tax evasion. Basing on assumptions of taxpayer’s behavior, our results allow defining the type of dependence of real tax rates on their nominal ones. We find that the graph, describing the taxpayer’s behavior, has two key points: maximum – the optimal tax rate (if this rate increase, the real tax revenues fall), and also the point of simple reproduction (after achieving this level, firms stop to pay taxes at all with appropriate shifting into informal sector or closing down). I.e. two key levels of tax burden: «optimal» and «zero» can be defined. The values of those parameters for taxpayers operating in different groups of industries were calculated.

• Item Type: MPRA Paper
• Language: English
• Keywords: tax burden, economic behavior, tax evasion, game theory
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance

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