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Income Tax Evasion in a Society of Heterogeneous Agents – Evidence from an Agent-based Model

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  • Sascha Hokamp
  • Michael Pickhardt

Abstract

We analyze the evolution and extent of income tax evasion under alternative governmental policies in an agent-based model with heterogeneous agents. A novel aspect of our modeling is the use of an exponential utility function, which allows us to assume rather realistic audit probabilities and to yield more realistic results with respect to the extent of tax evasion. Further, the introduction of lapse of time effects constitutes another novel aspect of our model. Among other things, the model allows for assessing the impact of alternative policies on tax evasion. Subject to the model features, we find that ethical norms and lapse of time effects reduce the extent of tax evasion particularly strong.

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Bibliographic Info

Paper provided by Institute of Spatial and Housing Economics, Munster Universitary in its series Working Papers with number 201035.

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Handle: RePEc:muc:wpaper:201035

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Related research

Keywords: income tax evasion; heterogeneous population; lapse of time; ethical behavior; agent-based models;

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References

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  1. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
  2. Georg Zaklan & Frank Westerhoff & Dietrich Stauffer, 2008. "Analysing tax evasion dynamics via the Ising model," Papers 0801.2980, arXiv.org.
  3. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
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Citations

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Cited by:
  1. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
  2. Zsombor Z. Méder & András Simonovits & János Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," Working Papers 1202, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  3. Pickhardt, Michael & Seibold, Goetz, 2011. "Income tax evasion dynamics: Evidence from an agent-based econophysics model," CAWM Discussion Papers 53, Center of Applied Economic Research Münster (CAWM), University of Münster.
  4. Nordblom, Katarina & Zamac, Jovan, 2011. "Endogenous Norm Formation Over the Life Cycle – The Case of Tax Evasion," Working Paper Series, Center for Fiscal Studies 2011:10, Uppsala University, Department of Economics.
  5. Hokamp, Sascha, 2014. "Dynamics of tax evasion with back auditing, social norm updating, and public goods provision – An agent-based simulation," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 187-199.
  6. Maria Letizia Bertotti & Giovanni Modanese, 2014. "Micro to macro models for income distribution in the absence and in the presence of tax evasion," Papers 1403.0015, arXiv.org.
  7. Paolo Pellizzari & Dino Rizzi, 2011. "A Multi-Agent Model of Tax Evasion with Public Expenditure," Working Papers 2011_15, Department of Economics, University of Venice "Ca' Foscari".
  8. Pellizzari, Paolo & Rizzi, Dino, 2014. "Citizenship and power in an agent-based model of tax compliance with public expenditure," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 35-48.
  9. Sebastian Eichfelder & Chantal Kegels, 2012. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Schumpeter Discussion Papers sdp12005, Universitätsbibliothek Wuppertal, University Library.
  10. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.
  11. Dino Rizzi, 2012. "Tax Evasion Indices and Profiles," Working Papers 2012:37, Department of Economics, University of Venice "Ca' Foscari", revised 2012.
  12. Andrei, Amanda L. & Comer, Kevin & Koehler, Matthew, 2014. "An agent-based model of network effects on tax compliance and evasion," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 119-133.

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