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Optimal Tax Evasion & Optimal Tax Evasion Policy Behavioral Aspects

  • Yael Benjamini
  • Shlomo Maital
Part of the Studies in Contemporary Economics book series (CONTEMPORARY, volume 15)

Abstract

This paper explores some important behavioral aspects of tax evasion — subjective probability bias, perception of other people’s behavior, social stigma — by building on work of Tversky & Kahneman (1979, 1981), Sagi & Weinblatt (1982) and Benjamini & Sagi (1983). The conventional expected-utility model of optimal tax evasion is portrayed graphically, then modified to include stigma and fear of apprehension, probability bias and misinformation. A game-theoretic model of tax evasion emphasizes the importance of one’s expectation about other people’s decision to evade or be honest. The next section develops a formula for optimal government policy against evasion, once evasion behavior is known. The final part of the paper describes a game-simulation study of tax evasion that relates underreporting of income to both tax parameters and individual personality.

Keywords

Risk Aversion Shadow Economy Audit Probability Evasion Behavior Fine Magnitude 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 1985

Authors and Affiliations

  • Yael Benjamini
    • 1
  • Shlomo Maital
    • 2
  1. 1.Tel Aviv UniversityIsrael
  2. 2.TechnionHaifaIsrael

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