Why Pay Taxes When No One Else Does?
AbstractIn this paper we try to understand the phenomena whereby a large proportion of the population evades tax payments. We present a model which incorporates elements from the theory of information cascades with the standard model of tax evasion and analyze the connection between the decision of a potential tax evader, the number of tax evaders and the number caught in previous periods. General conditions exist under which any expected utility maximizing tax evaders will decide to emulate other tax evaders.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4153.
Length: 22 pages
Date of creation: Apr 2009
Date of revision:
Publication status: published in: Review of Development Economics, 2010, 14 (2), 374-385
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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-05-23 (Accounting & Auditing)
- NEP-ALL-2009-05-23 (All new papers)
- NEP-HPE-2009-05-23 (History & Philosophy of Economics)
- NEP-PBE-2009-05-23 (Public Economics)
- NEP-PUB-2009-05-23 (Public Finance)
- NEP-UPT-2009-05-23 (Utility Models & Prospect Theory)
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