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Income Tax Evasion with Morally Constraint Taxpayers: The Role of Evasion Opportunities and Evasion Cost

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  • Ralph-C Bayer

    ()
    (School of Economics, University of Adelaide)

Abstract

This paper re-examines the individual tax-evasion decision. The standard portfolio approach is used to explain why higher tax rates and a higher gross income induce more tax evasion. These empirical facts could not be explained simultaneously with thin the standard framework before. We show these relations can be explained if risk-neutral taxpayers face some evasion cost, such as expenses related to evasion, moral cost or costs of fear. This is true for a very general class of tax and fine scheme. As an example we simulate our model for the German tax system and compare the results with empirical findings.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2003-04.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2003-04.

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Length: 32 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:adl:wpaper:2003-04

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Web page: http://www.economics.adelaide.edu.au/
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Related research

Keywords: tax evasion; risk preferences; moral constraints;

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