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Income Tax Evasion in a Society of Heterogeneous Agents - Evidence from an Agent-based Model

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  • Sascha Hokamp
  • Michael Pickhardt

Abstract

We analyze the evolution and extent of income tax evasion under alternative governmental policies in an agent-based model with heterogeneous agents. A novel aspect of our modeling is the use of an exponential utility function, which allows us to assume rather realistic audit probabilities and to yield more realistic results with respect to the extent of tax evasion. Further, the introduction of lapse of time effects constitutes another novel aspect of our model. Among other things, the model allows for assessing the impact of alternative policies on tax evasion. Subject to the model features, we find that ethical norms and lapse of time effects reduce the extent of tax evasion particularly strongly.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 24 (2010)
Issue (Month): 4 ()
Pages: 541-553

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Handle: RePEc:taf:intecj:v:24:y:2010:i:4:p:541-553

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Related research

Keywords: Income tax evasion; heterogeneous population; lapse of time; ethical behavior; agent-based models;

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References

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  1. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  2. Georg Zaklan & Frank Westerhoff & Dietrich Stauffer, 2009. "Analysing tax evasion dynamics via the Ising model," Journal of Economic Interaction and Coordination, Springer, vol. 4(1), pages 1-14, June.
  3. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
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Citations

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Cited by:
  1. Zsombor Z. Meder & Andras Simonovits & Janos Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," IEHAS Discussion Papers 1203, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  2. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.
  3. Nordblom, Katarina & Zamac, Jovan, 2011. "Endogenous Norm Formation over the Life Cycle. The case of tax evasion," Working Papers in Economics 511, University of Gothenburg, Department of Economics.
  4. Paolo Pellizzari & Dino Rizzi, 2012. "Citizenship and Power in an Agent-based Model of Tax Compliance with Public Expenditure," Working Papers 2012_24, Department of Economics, University of Venice "Ca' Foscari", revised 2012.
  5. Paolo Pellizzari & Dino Rizzi, 2011. "A Multi-Agent Model of Tax Evasion with Public Expenditure," Working Papers 2011_15, Department of Economics, University of Venice "Ca' Foscari".
  6. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
  7. Maria Letizia Bertotti & Giovanni Modanese, 2014. "Micro to macro models for income distribution in the absence and in the presence of tax evasion," Papers 1403.0015, arXiv.org.
  8. Sebastian Eichfelder & Chantal Kegels, 2012. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Schumpeter Discussion Papers sdp12005, Universitätsbibliothek Wuppertal, University Library.
  9. Simonovits, András & Vincze, János & Méder, Zsombor Zoltán, 2012. "Adómorál és adócsalás - társadalmi preferenciák és korlátozott racionalitás
    [Tax morale and tax system: social preferences and bounded rationality]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1086-1106.
  10. Pickhardt, Michael & Seibold, Goetz, 2014. "Income tax evasion dynamics: Evidence from an agent-based econophysics model," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 147-160.
  11. Andrei, Amanda L. & Comer, Kevin & Koehler, Matthew, 2014. "An agent-based model of network effects on tax compliance and evasion," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 119-133.
  12. Dino Rizzi, 2012. "Tax Evasion Indices and Profiles," Working Papers 2012:37, Department of Economics, University of Venice "Ca' Foscari", revised 2012.
  13. Hokamp, Sascha, 2014. "Dynamics of tax evasion with back auditing, social norm updating, and public goods provision – An agent-based simulation," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 187-199.

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