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Local Interaction in Tax Evasion

Author

Listed:
  • Barnabas M. Garay

    (Faculty of Information Technology - P zm ny P‚ter Catholic University)

  • Andras Simonovits

    (Institute of Economics Hungarian Academy of Sciences)

  • Janos Toth

    (Department of Analysis - Budapest University of Technology and Economics)

Abstract

We study a model of tax evasion, where a flat-rate tax only finances the provision of public goods. Deciding on reported income, each individual takes into account that the less he reports, the higher is his private consumption but the lower is his moral satisfaction. The latter depends on his own current report and average previous reports of his neighbors. Under quite general assumptions, the steady state reported income is symmetric and the process converges to the steady state.

Suggested Citation

  • Barnabas M. Garay & Andras Simonovits & Janos Toth, 2011. "Local Interaction in Tax Evasion," CERS-IE WORKING PAPERS 1104, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:1104
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    File URL: http://econ.core.hu/file/download/mtdp/MTDP1104.pdf
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    References listed on IDEAS

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    1. Zsombor Z. Meder & Andras Simonovits & Janos Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," CERS-IE WORKING PAPERS 1203, Institute of Economics, Centre for Economic and Regional Studies.
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    Cited by:

    1. Judit Karsai, 2012. "Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades," CERS-IE WORKING PAPERS 1201, Institute of Economics, Centre for Economic and Regional Studies.
    2. Andras Simonovits, 2011. "Higher tax morale implies a higher optimal income tax rate," CERS-IE WORKING PAPERS 1137, Institute of Economics, Centre for Economic and Regional Studies.
    3. Zsombor Z. Meder & Andras Simonovits & Janos Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," CERS-IE WORKING PAPERS 1203, Institute of Economics, Centre for Economic and Regional Studies.

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    More about this item

    Keywords

    tax evasion; steady state; asymptotic stability; symmetrization; networks; monotone maps;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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