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The excess burden of tax evasion - An experimental detection- concealment contest

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  • Ralph C Bayer

    (University of Adelaide)

  • Matthias Sutter

    (Max Planck Institute for Research into Economic Systems & University of Innsbruck)

Abstract

We present an experimental study on the wasted resources associated with tax evasion. This waste arises from taxpayers and tax authorities investing costly effort in the concealment and detection of tax evasion. We show that these socially inefficient efforts - as well as the frequency of tax evasion - depend positively on the prevailing tax rate, but not on the fine which is imposed in the event of detected tax evasion. Tax evasion is less frequent, though, than a model with risk neutral taxpayers predicts. We find evidence that this is due to individual moral constraints rather than to risk aversion.

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File URL: http://128.118.178.162/eps/exp/papers/0412/0412003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Experimental with number 0412003.

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Date of creation: 14 Dec 2004
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Handle: RePEc:wpa:wuwpex:0412003

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Keywords: tax evasion; contest; experiment; tax rates; fines;

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Citations

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Cited by:
  1. Giorgio Coricelli & Matteus Joffily & Claude Montmarquette & Marie-Claire Villeval, 2007. "Tax Evasion: Cheating Rationally or Deciding Emotionally?," Post-Print hal-00196332, HAL.
  2. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2014. "The hidden costs of tax evasion: collaborative tax evasion in markets for expert services," Economics Working Papers ECO2014/01, European University Institute.
  3. Ratbek Dzhumashev & Emin Gahramanov, 2009. "A Stochastic Growth Model with Income Tax Evasion: Implications for Australia," Economics Series 2009_05, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  4. Ratbek Dzhumashev & Emin Gahramanov, 2008. "Can We Tax The Desire For Tax Evasion?," Development Research Unit Working Paper Series 28/08, Monash University, Department of Economics.
  5. Ratbek Dzhumashev & Emin Gahramanov, 2010. "A Growth Model with Income Tax Evasion: Some Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 620-636, December.
  6. Pawe³ Pankiewicz, 2011. "The Individual Taxpayer Utility Function with Tax Optimization and Fiscal Fraud Environment," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 7(3), pages 52-58, November.
  7. Monica Keneley, 2004. "In the Service of the Society: Labour Management Practices in the Australian Life Insurance Industry to 1940," Economics Series 2004_19, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  8. Coricelli, Giorgio & Rusconi, Elena & Villeval, Marie Claire, 2014. "Tax evasion and emotions: An empirical test of re-integrative shaming theory," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 49-61.

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