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The Excess Burden of Tax Evasion: An Experimental Detection-Concealment Contest

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  • Ralph-C Bayer

    ()
    (School of Economics, University of Adelaide)

  • Matthias Sutter

    (Department of Public Economics, University of Innsbruck)

Abstract

We present an experimental study on the wasted resources associated with tax evasion. This waste arises from taxpayers and tax authorities, investing costly effort in concealment, respectively detection, of tax evasion. We show that (socially inefficient) efforts depend positively on the prevailing tax rate, but not on the fine which is imposed in case of detected tax evasion. The frequency of evasion increases with tax rates. Additionally, we observe less tax evasion than a model with risk neutral taxpayers predicts. We find evidence that this is rather due to individual moral constraints than due to risk aversion.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2003-05.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 2003-05.

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Length: 30 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:adl:wpaper:2003-05

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Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/
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Keywords: tax evasion; contest; experiment; tax rates; fines;

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References

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Citations

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Cited by:
  1. Coricelli, Giorgio & Rusconi, Elena & Villeval, Marie Claire, 2014. "Tax evasion and emotions: An empirical test of re-integrative shaming theory," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 49-61.
  2. Ratbek Dzhumashev & Emin Gahramanov, 2008. "Can We Tax the Desire for Tax Evasion?," Economics Series 2008_19, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  3. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2014. "The hidden costs of tax evasion: collaborative tax evasion in markets for expert services," Economics Working Papers ECO2014/01, European University Institute.
  4. Giorgio Coricelli & Matteus Joffily & Claude Montmarquette & Marie-Claire Villeval, 2007. "Tax Evasion: Cheating Rationally or Deciding Emotionally?," Post-Print hal-00196332, HAL.
  5. Monica Keneley, 2004. "In the Service of the Society: Labour Management Practices in the Australian Life Insurance Industry to 1940," Economics Series 2004_19, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  6. Pawe³ Pankiewicz, 2011. "The Individual Taxpayer Utility Function with Tax Optimization and Fiscal Fraud Environment," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 7(3), pages 52-58, November.
  7. Ratbek Dzhumashev & Emin Gahramanov, 2010. "A Growth Model with Income Tax Evasion: Some Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 620-636, December.
  8. Ratbek Dzhumashev & Emin Gahramanov, 2009. "A Stochastic Growth Model with Income Tax Evasion: Implications for Australia," Economics Series 2009_05, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.

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