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Tax Evasion on a Social Network

Duccio Gamannossi degl’Innocenti () and Matthew Rablen
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Duccio Gamannossi degl’Innocenti: University of Exeter, UK

No 2019005, Working Papers from The University of Sheffield, Department of Economics

Abstract: We relate tax evasion behavior to a substantial literature on social comparison in judgements. Taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their social network. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. Given that tax authorities are now investing heavily in big-data tools that aim to construct social networks, we investigate the value of acquiring network information. We do this using networks that allow for celebrity taxpayers, whose consumption is widely seen, and who are systematically of higher wealth. We show that there are pronounced returns to the initial acquisition of network information, albeit targeting audits with highly incomplete knowledge of social networks may be counterproductive.

Keywords: Tax Evasion; Social Networks; Network centrality; Optimal Auditing; Social Comparison; Relative Consumption (search for similar items in EconPapers)
JEL-codes: D85 H26 K42 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2019-02
New Economics Papers: this item is included in nep-acc, nep-gth, nep-iue, nep-law, nep-pay, nep-pbe, nep-pub, nep-soc, nep-ure and nep-war
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Citations: View citations in EconPapers (2)

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http://www.sheffield.ac.uk/economics/research/serps/articles/2019_005 First version, January 2019 (application/pdf)

Related works:
Journal Article: Tax evasion on a social network (2020) Downloads
Working Paper: Tax Evasion on a Social Network (2018) Downloads
Working Paper: Tax Evasion on a Social Network (2018) Downloads
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