Income Tax Evasion with Morally Constraint Taxpayers: The Role of Evasion Opportunities and Evasion Cost

Ralph-C Bayer ()

No 2003-04, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: This paper re-examines the individual tax-evasion decision. The standard portfolio approach is used to explain why higher tax rates and a higher gross income induce more tax evasion. These empirical facts could not be explained simultaneously with thin the standard framework before. We show these relations can be explained if risk-neutral taxpayers face some evasion cost, such as expenses related to evasion, moral cost or costs of fear. This is true for a very general class of tax and fine scheme. As an example we simulate our model for the German tax system and compare the results with empirical findings.

Keywords: tax evasion; risk preferences; moral constraints (search for similar items in EconPapers)
JEL-codes: H26 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2003-04

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