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Albert-Ludwigs-Universität Freiburg im Breisgau >
Institut für Allgemeine Wirtschaftsforschung, Abteilung für Wirtschaftspolitik und Ordnungstheorie, Universität Freiburg >
The Constitutional Economics Network Working Papers, Universität Freiburg >
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http://hdl.handle.net/10419/57635
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| Title: | | Penalties in the theory of equilibrium tax evasion: Solving King John's problem  |
| Authors: | | Neumärker, Bernhard Pech, Gerald |
| Issue Date: | | 2010 |
| Series/Report no.: | | The Constitutional Economics Network Working Papers 01-2010 |
| 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 |
| Appears in Collections: | | The Constitutional Economics Network Working Papers, Universität Freiburg
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