Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality

Zsombor Z. Meder (), Andras Simonovits () and Janos Vincze
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Zsombor Z. Meder: Maastricht University Department of Economics
Andras Simonovits: Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences and Budapest University of Technology and Economics Institute of Mathematics and Central European University, Department of Economics
Janos Vincze: Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences and Corvinus University of Budapest

No 1203, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: We study a family of models of tax evasion, where a flat-rate tax finances only the provision of public goods, neglecting audits and wage differences. We focus on the comparison of two modeling approaches. The first is based on optimizing agents, who are endowed with social preferences, their utility being the sum of private consumption and moral utility. The second approach involves agents acting according to simple heuristics. We find that while we encounter the traditionally shaped Laffer-curve in the optimizing model, the heuristics models exhibit (linearly) increasing Laffer-curves. This difference is related to a peculiar type of behavior emerging within the heuristics based approach: a number of agents lurk in a moral state of limbo, alternating between altruism and selfishness.

Keywords: tax evasion; tax morale; agent-based simulation (search for similar items in EconPapers)
JEL-codes: H26 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012-01
New Economics Papers: this item is included in nep-cmp, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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