EconPapers    
Economics at your fingertips  
 

Tax Evasion on a Social Network

Duccio Gamannossi degl'Innocenti and Matthew Rablen ()

No 7063, CESifo Working Paper Series from CESifo Group Munich

Abstract: We relate tax evasion behavior to a substantial literature on self and social comparison in judgements. Tax payers engage in tax evasion as a means to boost their expected consumption relative to others in their “local” social network, and relative to past consumption. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. The indirect revenue effects from auditing are shown to be ordinally equivalent to a related Bonacich centrality. We generate networks corresponding closely to the observed structure of social networks observed empirically. In particular, our networks contain celebrity taxpayers, whose consumption is widely observed, and who are systematically of higher wealth. In this context we show that, if the tax authority can observe the social network, it is able to raise its audit revenue by around six percent.

Keywords: tax evasion; social networks; network centrality; optimal auditing; social comparison; self comparison; habit; indirect effects; relative consumption (search for similar items in EconPapers)
JEL-codes: H26 D85 K42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-gth, nep-iue, nep-law, nep-net, nep-pbe, nep-pub, nep-soc and nep-ure
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.cesifo-group.de/DocDL/cesifo1_wp7063.pdf (application/pdf)

Related works:
Working Paper: Tax Evasion on a Social Network (2018) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7063

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2019-03-08
Handle: RePEc:ces:ceswps:_7063