Maurizio Bovi (ISAE - Institute for Studies and Economic Analyses) Roy Cerqueti (University of Macerata - Dept. of Economic and Financial Institutions)
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Virtually all governments seek to fight tax evasion exploiting better and better technological devices. Despite of that the phenomenon still remains alive and kicking all around the world. The foregoing naturally arises the question in the title. This paper develops a simple model to provide some answers to this puzzling issue. Tax evasion is persistent because of the taxpayer's opportunistic behavior and the complex relationships linking it to the cost/quality of the institutional setting. More fundamentally, our model highlights that conditions required for steady state zero-tax evasion (no taxation and/or 100$\%$ probability to be caught) are outside the strategies available for governments.
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Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number
111.