Collaborative tax evasion and social norms: why deterrence does not work
This paper makes a preliminary attempt to model a phenomenon of collaborative tax evasion between a seller and his customer and incorporates the social norm into such collusive tax-evading activities. It is found that, due to the existence of the social norm, more prevalent collaborative tax evasion at the status quo tends to intensify the extent of the tax evasion itself; this thus furnishes a self-fulfilling equilibrium and it may also give rise to multiple equilibria. More importantly, we find that the snowballing effect stemming from social norm has a decisive influence not only in determining the conformity of consumers to the tax code, but also the deterrent effect of the authority's tax enforcement. If collaborative tax evasion is initially rampant, raising fines for tax evasion will give rise to a strong venal effect that will increase tax evasion. Once this perverse effect outweighs the usual deterrent effect associated with raising fines for tax evasion, a more severe fine may result in higher rather than lower tax evasion. Copyright 2004, Oxford University Press.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 56 (2004)
Issue (Month): 2 (April)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:56:y:2004:i:2:p:344-368. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.