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Income Tax Evasion in a Society of Heterogeneous Agents – Evidence from an Agent-based Model

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  • Sascha Hokamp
  • Michael Pickhardt

Abstract

We analyze the evolution and extent of income tax evasion under alternative governmental policies in an agent-based model with heterogeneous agents. A novel aspect of our modeling is the use of an exponential utility function, which allows us to assume rather realistic audit probabilities and to yield more realistic results with respect to the extent of tax evasion. Further, the introduction of lapse of time effects constitutes another novel aspect of our model. Among other things, the model allows for assessing the impact of alternative policies on tax evasion. Subject to the model features, we find that ethical norms and lapse of time effects reduce the extent of tax evasion particularly strong.

Suggested Citation

  • Sascha Hokamp & Michael Pickhardt, "undated". "Income Tax Evasion in a Society of Heterogeneous Agents – Evidence from an Agent-based Model," Working Papers 201035, Institute of Spatial and Housing Economics, Munster Universitary.
  • Handle: RePEc:muc:wpaper:201035
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    References listed on IDEAS

    as
    1. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, pages 818-860.
    2. repec:wsi:ijmpcx:v:19:y:2008:i:12:n:s0129183108013357 is not listed on IDEAS
    3. Georg Zaklan & Frank Westerhoff & Dietrich Stauffer, 2009. "Analysing tax evasion dynamics via the Ising model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 4(1), pages 1-14, June.
    4. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
    5. Craig W. Kirkwood, 2004. "Approximating Risk Aversion in Decision Analysis Applications," Decision Analysis, INFORMS, vol. 1(1), pages 51-67, March.
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    Citations

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    Cited by:

    1. Pickhardt, Michael & Seibold, Goetz, 2014. "Income tax evasion dynamics: Evidence from an agent-based econophysics model," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 147-160.
    2. Simonovits, András & Vincze, János & Méder, Zsombor Zoltán, 2012. "Adómorál és adócsalás - társadalmi preferenciák és korlátozott racionalitás
      [Tax morale and tax system: social preferences and bounded rationality]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1086-1106.
    3. Zsombor Z. Méder & András Simonovits & János Vinczeb, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," Economic Analysis and Policy, Elsevier, vol. 42(2), pages 171-188, September.
    4. Hokamp, Sascha, 2014. "Dynamics of tax evasion with back auditing, social norm updating, and public goods provision – An agent-based simulation," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 187-199.
    5. Pellizzari, Paolo & Rizzi, Dino, 2014. "Citizenship and power in an agent-based model of tax compliance with public expenditure," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 35-48.
    6. Maria Letizia Bertotti & Giovanni Modanese, 2014. "Micro to macro models for income distribution in the absence and in the presence of tax evasion," Papers 1403.0015, arXiv.org.
    7. Sascha Hokamp & Götz Seibold, 2014. "Tax Compliance and Public Goods Provision. An Agent-based Econophysics Approach," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 6(4), pages 217-236, December.
    8. Nordblom, Katarina & Zamac, Jovan, 2011. "Endogenous Norm Formation Over the Life Cycle – The Case of Tax Evasion," Working Paper Series 2011:13, Uppsala University, Department of Economics.
    9. Andrei, Amanda L. & Comer, Kevin & Koehler, Matthew, 2014. "An agent-based model of network effects on tax compliance and evasion," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 119-133.
    10. Sebastian Eichfelder & Chantal Kegels, 2012. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Schumpeter Discussion Papers sdp12005, Universitätsbibliothek Wuppertal, University Library.
    11. Semjén, András, 2017. "Az adózói magatartás különféle magyarázatai
      [Various explanations for tax compliance]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 140-184.
    12. Geoffrey Warner & Sanith Wijesinghe & Uma Marques & Osama Badar & Jacob Rosen & Erik Hemberg & Una-May O’Reilly, 2015. "Modeling tax evasion with genetic algorithms," Economics of Governance, Springer, vol. 16(2), pages 165-178, May.
    13. Yi-Chung Hsu & Chien-Chiang Lee, 2016. "Factors Affecting Tax Evasion: Do Interest Rate And Regional Effects Matter?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-23, September.
    14. Matthew Gould & Matthew Rablen, 2016. "Voluntary Disclosure Schemes for Offshore Tax Evasion: An Analysis," CESifo Working Paper Series 5750, CESifo Group Munich.
    15. Michael Pickhardt & Aloys Prinz, 2012. "The Nature of Tax Evasion and the Shadow Economy," Chapters,in: Tax Evasion and the Shadow Economy, chapter 1 Edward Elgar Publishing.
    16. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
    17. Arslan, Mehmet Oğuz & İcan, Özgür, 2013. "The Effects Of Neighborhood On Tax Compliance Rates: Evidence From An Agent Based Model," MPRA Paper 64042, University Library of Munich, Germany.
    18. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.
    19. Antoci, Angelo & Russu, Paolo & Zarri, Luca, 2014. "Tax evasion in a behaviorally heterogeneous society: An evolutionary analysis," Economic Modelling, Elsevier, vol. 42(C), pages 106-115.
    20. Paolo Pellizzari & Dino Rizzi, 2011. "A Multi-Agent Model of Tax Evasion with Public Expenditure," Working Papers 2011_15, Department of Economics, University of Venice "Ca' Foscari".
    21. Laszlo Gulyas & Tamás Mahr & Istvan Janos Toth, 2015. "Factors to Curb Tax Evasion: Evidences from the TAXSIM Agent-Based Simulation Model," IEHAS Discussion Papers 1521, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    22. Dino Rizzi, 2012. "Tax Evasion Indices and Profiles," Working Papers 2012:37, Department of Economics, University of Venice "Ca' Foscari", revised 2012.

    More about this item

    Keywords

    income tax evasion; heterogeneous population; lapse of time; ethical behavior; agent-based models;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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