Penalties in the theory of equilibrium tax evasion: Solving King John's problem
We characterize equilibria of an income reporting game with bounded returns and no commitment where detected tax evaders are charged the maximally feasible amount. Introducing partial commitment to punishment relief eliminates multiplicity of equilibria. We identify a unique limit equilibrium where the poorest citizens evade, intermediate citizens are honest and the richest citizens are indifferent between evading and truth-telling. For small tax rates and auditing cost, committing to a discretionary punishment relief scheme increases expected tax revenue.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Kollegiengebäde II, Platz der Alten Synagoge, 79085 Freiburg|
Phone: +49 +761 / 203 2301
Fax: +49 +761 / 203 2303
Web page: http://www.wipo.uni-freiburg.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Landsberger, Michael & Monderer, Dov & Talmor, Irit, 2000. " Feasible Net Income Distributions Under Income Tax Evasion: An Equilibrium Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(1), pages 135-53.
- Derek Pyne, 2004. "Can Making It Harder to Convict Criminals Ever Reduce Crime?," European Journal of Law and Economics, Springer, vol. 18(2), pages 191-201, September.
- Wolfram F. Richter & Robin W. Boadway, 2005.
"Trading Off Tax Distortion and Tax Evasion,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 7(3), pages 361-381, 08.
- Gary S. Becker, 1974.
"Crime and Punishment: An Economic Approach,"
in: Essays in the Economics of Crime and Punishment, pages 1-54
National Bureau of Economic Research, Inc.
- repec:ebl:ecbull:v:8:y:2004:i:5:p:1-9 is not listed on IDEAS
- A. Mitchell Polinsky & Steven Shavell, 1999.
"The Economic Theory of Public Enforcement of Law,"
NBER Working Papers
6993, National Bureau of Economic Research, Inc.
- Kolm, Serge-Christophe, 1973. "A note on optimum tax evasion," Journal of Public Economics, Elsevier, vol. 2(3), pages 265-270, July.
- Sanjit Dhami & Ali al-Nowaihi, 2006. "Hang ’em with probability zero: Why does it not work?," Discussion Papers in Economics 06/14, Department of Economics, University of Leicester.
- Alm, James & McKee, Michael, 2004. "Tax compliance as a coordination game," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 297-312, July.
- Ingolf Dittmann, 2006. "The Optimal Use of Fines and Imprisonment If Governments Do Not Maximize Welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(4), pages 677-695, October.
When requesting a correction, please mention this item's handle: RePEc:zbw:cenwps:012010. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.