Game-theoretic model of tax evasion: analysis of agents’ interaction and optimization of tax burden

Sokolovskyi, Dmytro (2018): Game-theoretic model of tax evasion: analysis of agents’ interaction and optimization of tax burden.

Abstract

The article analyzes a tax evasion problem using game-theoretic tools. The model develops a well-known Alligham–Sandmo classic model by introducing parameters of “transparency” of detected violations, of cost of control, of tax evasion and of conscientious tax payment. For that model we calculated Nash-equilibrium conditions in pure strategies. Based on this we investigated the problem of optimization of real tax burden. It is shown that curve describing the dependence between actual tax burden from declared one has not 1 (like the Laffer curve), but 3 local maxima. Those findings may contribute to better calculation of tax burden in the real economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: tax evasion; game-theoretic model; Nash-equilibrium; tax burden; pure strategies; Laffer curve
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General

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