Tax evasion on a social network

Gamannossi degl’Innocenti, Duccio and Matthew Rablen

Journal of Economic Behavior & Organization, 2020, vol. 169, issue C, 79-91

Abstract: We relate tax evasion behavior to a substantial literature on social comparison in judgements. Taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their social network. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. Given that tax authorities are now investing heavily in big-data tools that aim to construct social networks, we investigate the value of acquiring network information. We do this using networks that allow for celebrity taxpayers, whose consumption is seen widely, and who are systematically of higher wealth. We show that there are pronounced returns to the initial acquisition of network information, especially in the presence of celebrity taxpayers.

Keywords: Tax evasion; Social networks; Network centrality; Optimal auditing; Social comparison; Relative consumption (search for similar items in EconPapers)
JEL-codes: D85 H26 K42 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Tax Evasion on a Social Network (2019)
Working Paper: Tax Evasion on a Social Network (2018)
Working Paper: Tax Evasion on a Social Network (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:169:y:2020:i:c:p:79-91

DOI: 10.1016/j.jebo.2019.11.001

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