Tax Avoidance and Social Control

Markus Diller (), Johannes Lorenz and David Meier
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Markus Diller: University of Passau
Johannes Lorenz: University of Passau
David Meier: University of Passau

A chapter in Operations Research Proceedings 2019, 2020, pp 633-639 from Springer

Abstract: Abstract This study presents a model in which heterogenous, risk-averse agents can use either (legal) tax optimisation or (illegal) tax evasion to reduce their tax burden and thus increase their utility. In addition to introducing individual variables like risk aversion or income, we allow agents to observe the behaviour of their neighbours. Depending on the behaviour of their peer group’s members, the agents’ utilities may increase or decrease, respectively. Simulation results show that taxpayers favour illegal evasion over legal optimisation in most cases. We find that interactions between taxpayers and their social networks have a deep impact on aggregate behaviour. Parameter changes such as increasing audit rates affect the results, often being intensified by social interactions. The effect of such changes varies depending on whether or not a fraction of agents is considered inherently honest.

Keywords: Tax compliance; Tax avoidance; Tax evasion; Social influence; Agent-based modelling (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-030-48439-2_77

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DOI: 10.1007/978-3-030-48439-2_77

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