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Evolution of Tax Evasion

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  • Lipatov, Vilen

Abstract

In this paper we analyze a tax evasion game with taxpayer learning by imitation. If the authority commits to a fixed auditing probability, a positive share of cheating is obtained in equilibrium. This stands in contrast to the existing literature that yields full compliance of audited taxpayer who are rational, have a lot of information and thus do not need to interact. When the authority adjusts auditing probability every period, cycling in cheating-auditing occurs. Thus, the real life phenomenon of compliance fluctuations is explained within the model rather than by exogenous parameter shifts.

Suggested Citation

  • Lipatov, Vilen, 2003. "Evolution of Tax Evasion," MPRA Paper 966, University Library of Munich, Germany, revised 06 Dec 2005.
    • Handle: RePEc:pra:mprapa:966
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    File URL: https://mpra.ub.uni-muenchen.de/966/1/MPRA_paper_966.pdf
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    References listed on IDEAS

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    Cited by:

    1. Anastasios Xepapadeas & Yannis Petrohilos-Andrianos, 2013. "On the Evolution of Compliance and Regulation with Tax Evading Agents," DEOS Working Papers 1325, Athens University of Economics and Business.
    2. Constadina Passa & Anastasios Xepapadeas, 2008. "Regulation of Farming Activities: An Evolutionary Approach," Working Papers 0811, University of Crete, Department of Economics.
    3. Lipatov, Vilen, 2006. "Tax Evasion and Coordination," MPRA Paper 1251, University Library of Munich, Germany, revised Dec 2006.
    4. Sokolovskyi, Dmytro & Sokolovska, Olena, 2016. "Tax burden optimization on economic agents by modeling interaction in the taxation system," MPRA Paper 71110, University Library of Munich, Germany, revised 05 May 2016.

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    More about this item

    Keywords

    tax evasion; imitation; learning;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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