A Tax Evasion - Bribery Game: Experimental Evidence from Ukraine
AbstractThis paper examines the issue of tax evasion by enterprises through underreporting activity. We develop a view of this phenomenon as an equilibrium of the game between a businessman and an imperfectly monitored supervising official, in which a businessman can hide part of his profit and offer bribe to official. We determine conditions under which such tax evasion and bribery become wide-spread in the society, resulting in shadow economy. The game is put into an experimental setting in Kiev, Ukraine, with the emphasis of spreading of the tax evasion and bribery activity in the laboratory setting. We find that once it becomes known that substantial share of subjects playing the role of supervising officials agree to accept bribes from subjects playing the role of businessmen, the latter offer bribes more aggressively. Yet, this in turn does not affect the behavior of subjects playing the role of supervising officials.
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Bibliographic InfoArticle provided by Cattaneo University (LIUC) in its journal The European Journal of Comparative Economics.
Volume (Year): 3 (2006)
Issue (Month): 1 (June)
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Tax Evasion; Bribery; Experiment; Learning in Games;
Find related papers by JEL classification:
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
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- David Joulfaian, 2009. "Bribes and Business Tax Evasion," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 227-244, December.
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