Controlling tax evasion fluctuations

Abstract

We incorporate the behaviour of tax evasion into the standard two-dimensional Ising model and augment it by providing policy-makers with the opportunity to curb tax evasion via an appropriate enforcement mechanism. We discuss different network structures in which tax evasion may vary greatly over time if no measures of control are taken. Furthermore, we show that even minimal enforcement levels may help to alleviate this problem substantially.

Controlling the Tax Evasion Dynamics via Majority-Vote Model on Various Topologies

“…In Section 3 we make an analysis of tax evasion dynamics with the Zaklan model on two-dimensional square lattices using MVM for their temporal evolution under different enforcement regimes; we discuss the results obtained. In Section 4 we show that MVM also is capable to control the different levels of the tax evasion analysed in Section 3, as it was made by Zaklan et al [16] using Ising models. We use the enforcement mechanism cited above on various structures: SL, SH network, BAD and BAU network; we discuss the resulting tax evasion dynamics.…”

“…Frey and Torgler [15] also provide empirical evidence on the relevance of conditional cooperation for tax morale. Following the same context, recently, Zaklan et al [16] developed an economics model to study the problem of tax evasion dynamics using the Ising model through MonteCarlo simulations with the Glauber and heatbath algorithms (that obey detailed-balance equilibrium) to study the proposed model. I have introduced for the first time the use of local majority rules in social systems.…”

“…These complex networks have been studied extensively by Lima et al in the context of magnetism (MVM, Ising, and Potts model) [35][36][37][38][39], econophysics models [16,40] and sociophysics model [41]. In the present work, we study the behavior of the tax evasion on two-dimensional LS, BAD and BAU networks, and SH networks using the dynamics of MVM, furthermore add a policy makers's tax enforcement mechanism consisting of two components: a probability of an audit each person is subject to in everyperiod and a length of time detected tax evaders remain honest.…”

“…In the present work, we study the behavior of the tax evasion on two-dimensional LS, BAD and BAU networks, and SH networks using the dynamics of MVM, furthermore add a policy makers's tax enforcement mechanism consisting of two components: a probability of an audit each person is subject to in everyperiod and a length of time detected tax evaders remain honest. We aim here is to extend the study of Zaklan et al [16], which illustrates how different levels of enforcement affect the tax evasion over time, to dynamics of MVM as an alternative model of nonequilibrium to the Ising model that is capable of reproduce the same results for analysis and control of the tax evasion fluctuations. Then, we show that the Zaklan model is very robust for equilibruim and nonequilibrium models and also for various topologies used here.…”

Tax Evasion Dynamics via Non-Equilibrium Model on Directed Small-World Networks

“…Zaklan et al [8] considered a large number of agents (people) who interact locally with their neighbors and base their decision whether to evade taxes or not on the behavior of their neighbors. They used the IM on a SL in the study of tax evasion.…”