A Theoretical Model to Discuss Tax Avoidance Based on Game Theory

Abstract

A consolidated research line in Brazil identified the proxies for determining the tax aggressiveness of companies listed on the B3 stock exchange. However, none of these studies identified the instrument used by Brazilian companies to carry out tax aggressiveness. Thus, our research seeks to fill this gap by demonstrating that fiscal aggressiveness results from the Brazilian tax complexity, that providing prerogatives to avoid or delay tax payments. Besides, this study is the first accounting study to demonstrate that special installments reduce the actual value of taxes owed by taxpayers, encouraging them to be tax aggressive. Through the foundations of Game Theory, this research demonstrates the cost-benefit of tax aggressiveness in maximizing the profit of tax avoidance. We examined the best strategic decisions in the tax avoidance game concerning the tax complexity and special installments experienced in Brazil. In this game, the only NASH equilibrium is tax avoidance since it is the only option with a chance of remuneration. Therefore, this research contributes to understanding business behavior concerning the Brazilian tax system and provides subsidies to encourage reform of the current tax complexity.

Luxury tax perspectives: The evidence of the Republic of Belarus

“…At the same time, based on bibliometric and scientometric analysis (Costa et al, 2023;Yunira et al, 2023), globalization and new economic reality have pushed macro financial and prudential issues of taxation onto center stage in scientific research on new key substantive issues and with a new emphasis on tax evasion and tax planning (aggressive taxation). The breadth and depth of the tax evasion and corporate tax avoidance matters by modern research are ranged from the morality of tax avoidance and inequality (Lokanan, 2023;Di Gioacchino, Fichera, 2020;Argentiero et al, 2021) to modeling of tax avoidance and implication of business digitalization and technologies on tax evasion (Gomes et al, 2023;Alm, 2021;Amzuică, Mititelu, & Nișulescu, 2023). Tax planning as a crucial part of ensuring a sound financial future and an important strategy that helps individuals and businesses to reduce their tax liability also has attracted increasing attention from researchers (Tartono, Hidayat, Haryono, 2021;Cheng et al, 2021;Zelmenis, 2022;Blaufus, Reineke, Trenn, 2023).…”