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Income Tax Evasion with Morally Constraint Taxpayers: The Role of Evasion Opportunities and Evasion Cost


  • Ralph-C Bayer

    () (School of Economics, University of Adelaide)


This paper re-examines the individual tax-evasion decision. The standard portfolio approach is used to explain why higher tax rates and a higher gross income induce more tax evasion. These empirical facts could not be explained simultaneously with thin the standard framework before. We show these relations can be explained if risk-neutral taxpayers face some evasion cost, such as expenses related to evasion, moral cost or costs of fear. This is true for a very general class of tax and fine scheme. As an example we simulate our model for the German tax system and compare the results with empirical findings.

Suggested Citation

  • Ralph-C Bayer, 2003. "Income Tax Evasion with Morally Constraint Taxpayers: The Role of Evasion Opportunities and Evasion Cost," School of Economics Working Papers 2003-04, University of Adelaide, School of Economics.
  • Handle: RePEc:adl:wpaper:2003-04

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    More about this item


    tax evasion; risk preferences; moral constraints;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance


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