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The excess burden of tax evasion – An experimental detection-concealment contest

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Author Info
Ralph-C Bayer
Matthias Sutter

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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 detect ion, 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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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2003-28.

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Length: 30 pages
Date of creation: Oct 2003
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Handle: RePEc:esi:discus:2003-28

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Related research
Keywords: tax evasion; contest; experiment; tax rates; fines;

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Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dzhumashev, Ratbek & Gahramanov, Emin, 2008. "Can We Tax the Desire for Tax Evasion?," MPRA Paper 11960, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Claude Montmarquette & Giorgio Coricelli & Mateus Joffily & Marie-Claire Villeval, 2007. "Tax Evasion: Cheating Rationally or Deciding Emotionally?," Working Papers 0724, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
  4. 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. [Downloadable!]
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