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Collusive tax evasion and social norms

Author

Listed:
  • Martin Abraham

    (Friedrich-Alexander University Erlangen-Nürnberg (FAU))

  • Kerstin Lorek

    (Friedrich-Alexander University Erlangen-Nürnberg (FAU))

  • Friedemann Richter

    (Friedrich-Alexander University Erlangen-Nürnberg (FAU))

  • Matthias Wrede

    () (Friedrich-Alexander University Erlangen-Nürnberg (FAU))

Abstract

Abstract Although collusive tax evasion by buyers and sellers of commodities and also by employers and employees is widespread all over the world, it has rarely been analyzed in the tax evasion literature. To fill this gap and to compare collusive tax evasion with independent tax evasion, this paper develops a simple noncooperative game-theoretic model and confirms the model’s predictions in a laboratory experiment. Because collusive tax evasion involves social interaction, this paper focuses on the effect of social norms and theoretically and empirically demonstrates that the tax compliance norm has a stronger negative effect on the magnitude of collusive tax evasion than on independent tax evasion. The reason for this result is that in a collusive tax evasion game with multiple equilibria social norms affect the range of equilibria and act as an equilibrium selection device, whereas social norms need to be strongly internalized to change the behavior of taxpayers who evade taxes unobservedly.

Suggested Citation

  • Martin Abraham & Kerstin Lorek & Friedemann Richter & Matthias Wrede, 2017. "Collusive tax evasion and social norms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 179-197, April.
  • Handle: RePEc:kap:itaxpf:v:24:y:2017:i:2:d:10.1007_s10797-016-9417-0
    DOI: 10.1007/s10797-016-9417-0
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christoph Engel, 2016. "Experimental Criminal Law. A Survey of Contributions from Law, Economics and Criminology," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2016_07, Max Planck Institute for Research on Collective Goods.
    2. Odd Erik Nygård & Joel Slemrod & Thor Olav Thoresen, 2016. "Distributional Implications of Joint Tax Evasion," CESifo Working Paper Series 5915, CESifo Group Munich.

    More about this item

    Keywords

    Collusive tax evasion; Third-party reporting; Social norms;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values

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