Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/57635 
Year of Publication: 
2010
Series/Report no.: 
The Constitutional Economics Network Working Papers No. 01-2010
Publisher: 
University of Freiburg, Institute for Economic Research, Department of Economic Policy and Constitutional Economic Theory, Freiburg i. Br.
Abstract: 
We characterize equilibria of an income reporting game with bounded returns and no commitment where detected tax evaders are charged the maximally feasible amount. Introducing partial commitment to punishment relief eliminates multiplicity of equilibria. We identify a unique limit equilibrium where the poorest citizens evade, intermediate citizens are honest and the richest citizens are indifferent between evading and truth-telling. For small tax rates and auditing cost, committing to a discretionary punishment relief scheme increases expected tax revenue.
Subjects: 
Tax evasion
signaling
optimal punishment
JEL: 
D82
H26
K42
Document Type: 
Working Paper

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