Using cumulative prospect theory as a notable example of reference-dependent preference, we revisit the basic portfolio model of tax evasion. We show that some controversial implications of the standard expected-utility theory, including that of a negative relationship between tax rates and evaded income, can be corrected in a direction more consistent with intuition and empirical evidence.
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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 60 (2004) Issue (Month): 3 (September) Pages: 422- Download reference. The following formats are available: HTML
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Find related papers by JEL classification: H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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