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A Tax Evasion - Bribery Game: Experimental Evidence from Ukraine

Author

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  • Volodymyr Bilotkach

Abstract

This paper examines the issue of tax evasion by enterprises through underreporting activity. We develop a view of this phenomenon as an equilibrium of the game between a businessman and an imperfectly monitored supervising official, in which a businessman can hide part of his profit and offer bribe to official. We determine conditions under which such tax evasion and bribery become wide-spread in the society, resulting in shadow economy. The game is put into an experimental setting in Kiev, Ukraine, with the emphasis of spreading of the tax evasion and bribery activity in the laboratory setting. We find that once it becomes known that substantial share of subjects playing the role of supervising officials agree to accept bribes from subjects playing the role of businessmen, the latter offer bribes more aggressively. Yet, this in turn does not affect the behavior of subjects playing the role of supervising officials.

Suggested Citation

  • Volodymyr Bilotkach, 2006. "A Tax Evasion - Bribery Game: Experimental Evidence from Ukraine," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 3(1), pages 31-49, June.
  • Handle: RePEc:liu:liucej:v:3:y:2006:i:1:p:31-49
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    File URL: http://eaces.liuc.it/18242979200601/182429792006030103.pdf
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    Cited by:

    1. Bobkova, Nina & Egbert, Henrik, 2012. "Corruption investigated in the lab: a survey of the experimental literature," MPRA Paper 38163, University Library of Munich, Germany.
    2. Abigail Barr & Danila Serra, 2009. "The effects of externalities and framing on bribery in a petty corruption experiment," Experimental Economics, Springer;Economic Science Association, vol. 12(4), pages 488-503, December.
    3. Iskandar, Deden Dinar & Wuenscher, Tobias, 2012. "Finding the Stronger Impact among Bribery, Financial Reward, and Religious Attitude: The Insights of Experiment on Environmental Tax Compliance in Indonesia," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124316, Australian Agricultural and Resource Economics Society.
    4. Abigail Barr & Danila Serra, 2009. "The effects of externalities and framing on bribery in a petty corruption experiment," Experimental Economics, Springer;Economic Science Association, vol. 12(4), pages 488-503, December.

    More about this item

    Keywords

    Tax Evasion; Bribery; Experiment; Learning in Games;

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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