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Why Pay Taxes When No One Else Does?

  • Gil S. Epstein
  • Ira N. Gang

In this paper we try to understand the phenomenon 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 potential tax evaders will decide to emulate other tax evaders. Copyright � 2010 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9361.2010.00559.x
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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 14 (2010)
Issue (Month): 2 (05)
Pages: 374-385

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Handle: RePEc:bla:rdevec:v:14:y:2010:i:2:p:374-385
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  18. Pommerehne, Werner W & Hart, Albert & Frey, Bruno S, 1994. "Tax Morale, Tax Evasion and the Choice of Policy Instruments in Different Political Systems," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 52-69.
  19. de Juan, Ana & Lasheras, Miguel A & Mayo, Rafaela, 1994. "Voluntary Tax Compliant Behavior of Spanish Income Tax Payers," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 90-105.
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