The Tax Compliance Demand Curve: A Diagrammatical Approach to Income Tax Evasion

Gideon Yaniv

The Journal of Economic Education, 2009, vol. 40, issue 2, 213-224

Abstract: One of the most interesting results in the tax evasion literature is that an increase in the income tax rate would increase tax compliance. Despite its peculiarity, this result has gained acceptance as a cornerstone for further developments of the rational tax evasion model. However, because of the mathematical format by which it is conveyed, this counterintuitive result has remained inaccessible to undergraduate students as well as to noneconomists. The author first introduces the rational tax evasion model in a nonmathematical style that is accessible to any reader. Second, he shows that the behavioral predictions of the rational tax evasion model can easily be obtained using a simple graphical representation of the optimum condition that involves the derivation of a demand curve for tax compliance.

Date: 2009
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DOI: 10.3200/JECE.40.2.213-224

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