EconPapers    
Economics at your fingertips  
 

Tax evasion and unaccounted incomes: A theoretical approach

Amey Sapre ()

Working Papers from National Institute of Public Finance and Policy

Abstract: This paper analyzes the problem of tax evasion by incorporating a simple game theoretic framework wherein an individual is confronted with the decision of declaring income for taxation. The model is a re-formulation of Allingham Sandmo (1972) and Srinivasan (1973) original single period decision making problem and extends it to to a repeated game involving a tax payer and a tax authority. The game theoretic results shows that probability of audit and penalty rate are inversely related and that beyond a threshold penalty rate, the tax payer has no incentive to evade. In an infinitely repeated game setting, first, the threat of audit in all future periods acts as a deterrent to evasion and second, the result provides some intuitive understanding of the role of patience and equilibrium strategies in a long repetitive engagement that supports cooperation and prevents deviations.

Keywords: Tax evasion; Repeated game; Public Finance (search for similar items in EconPapers)
JEL-codes: C73 H26 (search for similar items in EconPapers)
Pages: 23
Date: 2019-12
New Economics Papers: this item is included in nep-acc, nep-gth, nep-iue, nep-pbe and nep-pub
Note: Working Paper 289, 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.nipfp.org.in/media/medialibrary/2019/12/WP_289_2019.pdf (application/pdf)

Related works:
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:npf:wpaper:19/289

Access Statistics for this paper

More papers in Working Papers from National Institute of Public Finance and Policy
Bibliographic data for series maintained by S.Siva Chidambaram ( this e-mail address is bad, please contact ).

 
Page updated 2021-07-27
Handle: RePEc:npf:wpaper:19/289