Tax evasion is modeled as a risky activity and integrated into a standard problem of optimal tax design. It is shown that there is a trade off between reducing tax evasion and reducing tax distortion. Thus it is efficient to supplement a broad-based wage tax by a tax on specific consumption if the former is evaded and the latter not. The optimal tax structure can be characterized by an explicit...

In this paper, we examine the distributional effects of tax evasion, using results from theoretical, experimental, empirical, and especially the general equilibrium literatures on tax evasion. Much – if not all – of this evidence concludes that the main beneficiaries of successful tax evasion are the tax evaders themselves, with distributional effects that largely favor higher income individual...

In this paper, we examine the distributional effects of tax evasion, using results from theoretical, experimental, empirical, and especially the general equilibrium literatures on tax evasion. Much – if not all – of this evidence concludes that the main beneficiaries of successful tax evasion are the tax evaders themselves, with distributional effects that largely favor higher income individual...

We embed the behaviour of tax evasion into the standard two-dimensional Ising model. In the presence of an external magnetic field, the Ising model is able to generate the empirically observed effect of tax morale, i.e. the phenomenon that in some countries tax evasion is either rather high or low. The external magnetic field captures the agents’ trust in governmental institutions. We also find...

This paper models a capital-exporting country that encounters difficulties in taxing foreignsource income, due to tax evasion problems. The paper compares the country’s optimal effective tax rates on the income from capital invested at home and abroad (including penalties levied on detected tax evaders). It finds that tax evasion abroad does not provide a justification for a relatively low effe...

We extend the standard, one-period model of tax evasion to an intertemporal framework in which an expected-utility-maximizing taxpayer updates expectations about the probability of a future audit based on past audit experience. This framework provides a theoretical grounding for the empirical evidence indicating that tax evasion is affected by taxpayers' perceptions of audit probabilities and i...

This paper attempts to estimate the size and distribution of tax evasion in rich countries. We combine random audits—the key source used to study tax evasion so far—with new micro-data leaked from large offshore financial institutions—HSBC Switzerland (“Swiss leaks”) and Mossack Fonseca (“Panama Papers”)—matched to population-wide wealth records in Norway, Sweden, and Denmark. We find that tax ...

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...

Tax Evasion, Welfare Fraud, and “The Broken Windows” Effect: An Experiment in Belgium, France and the Netherlands In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others’ behavior. Subjects have to decide between a ‘registered’ income, the realiza...