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The Evolution of Tax Evasion in the Czech Republic: A Markov Chain Analysis

  • Jan Hanousek

    (Center for Economic Research and Graduate Education-Economics Institute)

  • Filip Palda

    (École nationale d'administration publique at Montreal)

We use a dataset of 1062 individuals from the Czech Republic to forecast the evolution of tax evasion in that country. We ask each respondent how intensely (never, sometimes, often) he evaded taxes in 1995, 1999, and 2000, to calculate probabilities the average individual will move between these categories of evasion in any given year. These "trasition" probabilities allow us to predict a rising tide of tax evasion in the next decade. We estimate the reduced form parameters which determine evasion and suggest how government might influence these parameters to prevent the Czech Republic from bogging down in a permanent mire of tax evasion. (JEL Codes : H26, H43, K42, O17)

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File URL: http://econwpa.repec.org/eps/pe/papers/0205/0205002.pdf
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Paper provided by EconWPA in its series Public Economics with number 0205002.

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Date of creation: 09 May 2002
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Handle: RePEc:wpa:wuwppe:0205002
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  1. Eduardo Engel & James R. Hines Jr., 1998. "Understanding Tax Evasion Dynamics," Documentos de Trabajo 47, Centro de Economía Aplicada, Universidad de Chile.
  2. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
  3. Fortin, Bernard & Lacroix, Guy & Montmarquette, Claude, 1997. "Are Underground Workers More Likely to be Underground Consumers?," Cahiers de recherche 9710, Université Laval - Département d'économique.
  4. Cremer, Helmuth & Gahvari, Firouz, 1996. "Tax evasion and the optimum general income tax," Journal of Public Economics, Elsevier, vol. 60(2), pages 235-249, May.
  5. Jung, Young H. & Snow, Arthur & Trandel, Gregory A., 1994. "Tax evasion and the size of the underground economy," Journal of Public Economics, Elsevier, vol. 54(3), pages 391-402, July.
  6. Reinganum, Jennifer F & Wilde, Louis L, 1991. "Equilibrium Enforcement and Compliance in the Presence of Tax Practitioners," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(1), pages 163-81, Spring.
  7. Feige, Edgar L & McGee, Robert T, 1983. " Sweden's Laffer Curve: Taxation and the Unobserved Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(4), pages 499-519.
  8. Jan Hanousek & Filip Palda, 2002. "Why People Evade Taxes in the Czech and Slovak Republics: A Tale of Twins," Public Economics 0205003, EconWPA.
  9. Watson, Harry, 1985. "Tax evasion and labor markets," Journal of Public Economics, Elsevier, vol. 27(2), pages 231-246, July.
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