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Why Pay Taxes When No One Else Does?

Author

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  • Epstein, Gil S.

    (Bar-Ilan University)

  • Gang, Ira N.

    (Rutgers University)

Abstract

In this paper we try to understand the phenomena whereby a large proportion of the population evades tax payments. We present a model which incorporates elements from the theory of information cascades with the standard model of tax evasion and analyze the connection between the decision of a potential tax evader, the number of tax evaders and the number caught in previous periods. General conditions exist under which any expected utility maximizing tax evaders will decide to emulate other tax evaders.

Suggested Citation

  • Epstein, Gil S. & Gang, Ira N., 2009. "Why Pay Taxes When No One Else Does?," IZA Discussion Papers 4153, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4153
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    References listed on IDEAS

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    Cited by:

    1. Gil S. Epstein & Ira N. Gang, 2019. "Inequality, good governance, and endemic corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 999-1017, October.
    2. James Alm, 2014. "Tax evasion, labor market effects, and income distribution," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-91, October.
    3. DAS-GUPTA Arindam & B. ESTRADA Gemma & PARK Donghyun, 2016. "Measuring Tax Administration Effectiveness and its Impact on Tax Revenue," Working Papers DP-2016-17, Economic Research Institute for ASEAN and East Asia (ERIA).
    4. James Alm & Matthias Kasper, 2020. "Tax evasion, market adjustments, and income distribution," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-91, February.
    5. Rajat Deb & Sourav Chakraborty, 2017. "Tax Perception and Tax Evasion," IIM Kozhikode Society & Management Review, , vol. 6(2), pages 174-185, July.
    6. Liliana Harding & Mihai Mutascu, 2016. "Does migration affect tax revenue in Europe?," University of East Anglia School of Economics Working Paper Series 2016-08, School of Economics, University of East Anglia, Norwich, UK..
    7. Gil S. Epstein & Ira N. Gang, 2019. "Inequality, good governance, and endemic corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 999-1017, October.
    8. Epstein, Gil S. & Gang, Ira N., 2024. "Herding, taxpayer's rent seeking and endemic corruption," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 533-546.
    9. Antoci, Angelo & Russu, Paolo & Zarri, Luca, 2014. "Tax evasion in a behaviorally heterogeneous society: An evolutionary analysis," Economic Modelling, Elsevier, vol. 42(C), pages 106-115.

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    More about this item

    Keywords

    information cascades; tax evasion; uncertainty;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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