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The Excess Burden of Tax Evasion: An Experimental Detection-Concealment Contest

Listed author(s):
  • Ralph-C Bayer

    ()

    (School of Economics, University of Adelaide)

  • Matthias Sutter

    (Max Planck Institute for Research into Economic Systems
    University of Innsbruck)

We present an experimental study on the wasted resources associated with tax evasion. This waste arises from taxpayers and tax authorities investing costly effort in the concealment and detection of tax evasion. We show that these socially inefficient efforts - as well as the frequency of tax evasion - depend positively on the prevailing tax rate, but not on the fine which is imposed in the event of detected tax evasion. Tax evasion is less frequent, though, than a model with risk neutral taxpayers predicts. We find evidence that this is due to individual moral constraints rather than to risk aversion.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2004-07.pdf
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Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2004-07.

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Length: 35 pages
Date of creation: 2004
Handle: RePEc:adl:wpaper:2004-07
Contact details of provider: Postal:
Adelaide SA 5005

Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/

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