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Game-theoretic model of tax evasion: analysis of agents’ interaction and optimization of tax burden

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  • Sokolovskyi, Dmytro

Abstract

The article analyzes a tax evasion problem using game-theoretic tools. The model develops a well-known Alligham–Sandmo classic model by introducing parameters of “transparency” of detected violations, of cost of control, of tax evasion and of conscientious tax payment. For that model we calculated Nash-equilibrium conditions in pure strategies. Based on this we investigated the problem of optimization of real tax burden. It is shown that curve describing the dependence between actual tax burden from declared one has not 1 (like the Laffer curve), but 3 local maxima. Those findings may contribute to better calculation of tax burden in the real economy.

Suggested Citation

  • Sokolovskyi, Dmytro, 2018. "Game-theoretic model of tax evasion: analysis of agents’ interaction and optimization of tax burden," MPRA Paper 86415, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:86415
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    References listed on IDEAS

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    Cited by:

    1. Salah Salimian & Mahdi Movahedi Beknazar & Sattar Salimian, 2023. "Modeling Tax Declaration Behavior and Quality of Tax Processing: A Game Theory Approach," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 9(1), pages 64-75.
    2. Sokolovskyi, Dmytro, 2018. "Factors for the formation of inefficient states when using tax incentive regimes," MPRA Paper 89141, University Library of Munich, Germany.

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    More about this item

    Keywords

    tax evasion; game-theoretic model; Nash-equilibrium; tax burden; pure strategies; Laffer curve;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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