A model of tax evasion with group conformity and social customs

Tax Evasion and Tax Compliance

“…Social stigma is likely to give rise to a multiplicity of possible equilibria: when most people evade, the stigma effect is small and evasion is not in fact discouraged; when few evade, the stigma effect is great and evasion is discouraged. The transition from one equilibrium to the other takes the form of a 'noncompliance epidemic': if, for some reason, more people start to evade, the stigma decreases and evasion spreads to an ever larger fraction of the population (see Benjamini and Maital, 1985;Gordon, 1989, andMyles andNaylor, 1996). Alm and McCallin (1990), Landskroner, Paroush and Swary (1990), Yaniv (1990), and have extended Allingham and Sandmo with models in which taxpayers face more complex 'portfolio' set-ups offering other risky activities and alternative forms of evasion.…”

Social norms and conditional cooperative taxpayers

“…While the properties of his framework are similar to ours, he uses numerical simulations to show results that we can derive analytically. Myles and Naylor (1996) consider a social norm (respectively a social custom) for tax compliance. In contrast to our approach, however, they assume that the disutility from a norm deviation is independent of the amount of evasion.…”

Do the catholic and protestant countries differ by their tax morale?

“…Following this line of argument, Gordon (1989) incorporates social norms into the evasion decision assuming that the utility cost to evasion increases in the proportion of taxpayers who do not evade. The experiment by Myles and Naylor (1996) confirm a tax evasion model where a social custom utility is derived when taxes are paid honestly and a conformity payoff from adhering to the standard pattern of social behavior 2 . The results of Orvaska and Hudson (2002) suggest that evasion is condoned by a large proportion of the population though people appear to be deterred from tax evasion by the consequences of being caught.…”