The excess burden of tax evasion—An experimental detection–concealment contest

Bayer, Ralph-C; Sutter, Matthias

doi:10.1016/j.euroecorev.2008.09.004

Cited by 20 publications

(14 citation statements)

References 28 publications

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“…Contrary to the results of the non-parametric statistical test, the regression picks up a weakly significant difference between participant types, with sellers being about 12 percentage points more likely than buyers to opt for tax evasion, ceteris paribus. Similar to previous studies such as Baldry (1987) and Bayer and Sutter (2009) we also find a significant effect of gender on the probability of tax evasion, with females exhibiting a lower propensity to be tax-dishonest. Risk attitude shows up insignificantly, implying that we do not find any evidence that risk attitudes are important for tax-honesty in the tax-decision stage.…”

Section: The Tax-decision Stage: Revealed Intentions To Evade Taxessupporting

confidence: 89%

The hidden costs of tax evasion.

Balafoutas

Beck

Kerschbamer

et al. 2015

Journal of Public Economics

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We experimentally examine the impact of tax evasion attempts on the performance of credence goods markets, where contractual incompleteness results from asymmetric information on the welfare maximizing quality of the goods. Our results suggest that tax evasion attempts -independently of whether they are successful or not -lead to efficiency losses in the form of too low quality and less frequent trade. Thus, shadow economies may reduce welfare not only by inducing agents to incur costs to hide or to uncover taxable transactions, by imposing risk on uncertainty-averse tax evaders and by distorting competition, but also by creating an additional efficiency loss in the underlying market by forfeiting possible gains from trade and by inducing insufficient quality provision. We call these the hidden costs of tax evasion.

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Section: The Tax-decision Stage: Revealed Intentions To Evade Taxessupporting

confidence: 89%

The hidden costs of tax evasion.

Balafoutas

Beck

Kerschbamer

et al. 2015

Journal of Public Economics

Self Cite

View full text Add to dashboard Cite

show abstract

“…In reality, tax evasion involves a variety of costs, such as the time, effort and money wasted by the taxpayer attempting to ensure that he will get away with cheating (see, among others, Cowell, 1990;Chen, 2003 andBayer &Sutter, 2009). All agents evade taxes by under-reporting their true earnings.…”

Section: A Household's Problemmentioning

confidence: 99%

“…Most empirical studies suggest a positive relationship between taxes and tax evasion (e.g. 2 Costly evasion was previously considered by Usher (1986), Cowell (1990), Kaplow (1990), Cremer and Gahvari (1994), Chen (2003) and Bayer and Sutter (2009) These studies are mainly theoretical. 2 Costly evasion was previously considered by Usher (1986), Cowell (1990), Kaplow (1990), Cremer and Gahvari (1994), Chen (2003) and Bayer and Sutter (2009) These studies are mainly theoretical.…”

Section: Introductionmentioning

confidence: 99%

“…Clotfelter, 1983;Crane & Nourzad, 1990;Alm et al, 1993). Bayer and Sutter's (2009) study is the only one which quantifies the impact of various policy instruments on the excess burden of tax evasion within a rigorous experimental game-theoretic framework. Bayer and Sutter's (2009) study is the only one which quantifies the impact of various policy instruments on the excess burden of tax evasion within a rigorous experimental game-theoretic framework.…”

Section: Introductionmentioning

confidence: 99%

“…2 Costly evasion was previously considered by Usher (1986), Cowell (1990), Kaplow (1990), Cremer and Gahvari (1994), Chen (2003) and Bayer and Sutter (2009) These studies are mainly theoretical. Bayer and Sutter's (2009) study is the only one which quantifies the impact of various policy instruments on the excess burden of tax evasion within a rigorous experimental game-theoretic framework.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

A Growth Model with Income Tax Evasion: Some Implications for Australia*

Dzhumashev

Gahramanov

2010

Economic Record

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We develop an endogenous growth model a`la Barro (1990), augmented with income tax evasion. Unlike many traditional rational choice models of tax evasion, the numerical simulations of our model do not produce counter-intuitive results. Further, we show that: (i) accounting for evasion costs (while capturing the full risk associated with the tax evasion process) is important for obtaining realistic relationships between key model variables;(ii) productive government expenditures explicitly affect the economy's tax evasion rate; (iii) Barro's natural efficiency condition for setting the optimal statutory tax rate holds even in the presence of tax evasion; (iv) given realistic estimates of the public expenditure externality, the average marginal income tax rate in Australia is not too far away from the optimal one; and (v) differences in tax evasion opportunities aggravate inequality over time.* We thank, without implicatingand the seminar participants of the 2009 14th Australasian Macroeconomic Workshop at Deakin University for helpful comments on a recent version of the article. We also thank James Feigenbaum, Shlomo Yitzhaki, Jean-Pierre Laffargue, Stephen Miller, He-ling Shi and the seminar participants at Monash University for helpful comments on an earlier version of this article. Special thanks go to Jeffrey Sheen and two anonymous referees for useful suggestions and feedback. All errors are our own. JEL classifications: H26, D91, O41

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Information processing in tax decisions: a MouselabWEB study on the deterrence model of income tax evasion

Olsen

Muller

Kirchler

2022

Behavioral Decision Making

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The highly influential Allingham and Sandmo model of income tax evasion assumes that taxpayers are driven by utility maximization, choosing evasion over compliance if it yields a higher expected profit. We test the main assumptions of this so-called deterrence approach considering both compliance decisions and the process of information acquisition using MouselabWEB. In an incentivized experiment, 109 participants made 24 compliance decisions with varying information presented for four within-subject factors (the four central model parameters: income, tax rate, audit probability, and fine level). Additionally, explicit expected value information was indicated in one of two conditions. The results reveal that participants attended to all relevant information, a prerequisite for expected value-like calculations. As predicted by the deterrence model, choices were clearly influenced by audit probability and fine level. Against the model assumptions, the presented parameters were not integrated adequately, indicated by a non-monotonic increase of evasion with rising expected rate of return from evasion. Additionally, more transitions between information necessary for calculating expected values did not result in higher model conformity, just as presenting explicit information on expected values. We conclude that deterrence information clearly influences tax compliance decisions in our setting but observed deviations from the deterrence model can be attributed to failures to properly integrate all relevant parameters.

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The excess burden of tax evasion—An experimental detection–concealment contest

Cited by 20 publications

References 28 publications

The hidden costs of tax evasion.

The hidden costs of tax evasion.

A Growth Model with Income Tax Evasion: Some Implications for Australia*

Information processing in tax decisions: a MouselabWEB study on the deterrence model of income tax evasion

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