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Collusive Tax Evasion and Social Norms

Author

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  • Wrede, Matthias
  • Abraham, Martin
  • Lorek, Kerstin
  • Richter, Friedemann

Abstract

Although collusive tax evasion by buyers and sellers of commodities and also by employers and employees is widespread all over the world, it has rarely been analyzed in the tax evasion literature. To fill this gap and to compare collusive tax evasion with independent tax evasion, this paper develops a simple non-cooperative game-theoretic model and confirms the model's predictions in a laboratory experiment. Because collusive tax evasion involves social interaction, this paper focuses on the effect of social norms and theoretically and empirically demonstrates that the tax compliance norm has a stronger negative effect on the magnitude of collusive tax evasion than on independent tax evasion. The reason for this result is that in a collusive tax evasion game with multiple equilibria social norms act as an equilibrium selection device, whereas social norms need to be internalized to change the behavior of taxpayers who evade taxes unobservedly.

Suggested Citation

  • Wrede, Matthias & Abraham, Martin & Lorek, Kerstin & Richter, Friedemann, 2015. "Collusive Tax Evasion and Social Norms," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112859, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc15:112859
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    References listed on IDEAS

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    Cited by:

    1. Christoph Engel, 2016. "Experimental Criminal Law. A Survey of Contributions from Law, Economics and Criminology," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2016_07, Max Planck Institute for Research on Collective Goods.
    2. Marie Bjørneby & Annette Alstadsæter & Kjetil Telle, 2018. "Collusive Tax Evasion by Employers and Employees: Evidence from a Randomized Field Experiment in Norway," CESifo Working Paper Series 7381, CESifo.
    3. Tim Lohse & Sven A. Simon, 2018. "Compliance in Teams - Implications of Joint Decisions and Shared Consequences," Working Papers tax-mpg-rps-2018-03_4, Max Planck Institute for Tax Law and Public Finance.
    4. Jianjun Li & Xuan Wang, 2020. "Does VAT have higher tax compliance than a turnover tax? Evidence from China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(2), pages 280-311, April.
    5. Odd E Nygård & Joel Slemrod & Thor O Thoresen, 2019. "Distributional Implications of Joint Tax Evasion," Economic Journal, Royal Economic Society, vol. 129(620), pages 1894-1923.
    6. Doerr, Annabelle & Necker, Sarah, 2021. "Collaborative tax evasion in the provision of services to consumers: A field experiment," ZEW Discussion Papers 21-024, ZEW - Leibniz Centre for European Economic Research.
    7. Kaisa Kotakorpi & Satu Metsälampi & Topi Miettinen & Tuomas Nurminen, 2019. "The effect of reporting institutions on tax evasion:Evidence from the lab," Discussion Papers 127, Aboa Centre for Economics.
    8. Doerr, Annabelle & Necker, Sarah, 2018. "Toward an understanding of collaborative tax evasion: A natural field experiment with businesses," Freiburg Discussion Papers on Constitutional Economics 18/13, Walter Eucken Institut e.V..
    9. Odd E Nygård & Joel Slemrod & Thor O Thoresen, 2019. "Distributional Implications of Joint Tax Evasion," Economic Journal, Royal Economic Society, vol. 129(620), pages 1894-1923.

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    More about this item

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other

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