Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128028
Authors: 
Niepelt, Dirk
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Study Center Gerzensee 04.07
Abstract: 
Standard models of tax evasion implicitly assume that evasion is either fully detected, or not detected at all. Empirically, this is not the case, casting into doubt the traditional rationales for interior evasion choices. I propose two alternative, dynamic explanations for interior tax evasion rates: Fines depending on the duration of an evasion spell, and different vintages of income sources subject to aggregate risk and fixed costs when switched between evasion states. The dynamic approach yields a transparent representation of revenue losses and social costs due to tax evasion, novel findings on the effect of policy on tax evasion, and a tractable framework for the analysis of tax evasion dynamics.
Subjects: 
Dynamic tax evasion
detection risk
duration dependent fine
inaction range
optimal taxation
JEL: 
E6
H2
Document Type: 
Working Paper

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