On the role of backauditing for tax evasion in an agent-based Econophysics model

TL;DR

This paper explores how backauditing and penalty rates influence tax compliance within an agent-based econophysics model, providing insights into tax evasion dynamics through an inhomogeneous Ising framework.

Contribution

It introduces a microfoundation for tax evasion models by incorporating backauditing and endogenous penalties into an inhomogeneous Ising model.

Findings

Backauditing increases tax compliance.

Endogenous penalties affect agent behavior.

Model offers new insights into tax evasion mechanisms.

Abstract

We investigate an inhomogeneous Ising model in the context of tax evasion dynamics where different types of agents are parametrized via local temperatures and magnetic fields. In particular, we analyse the impact of backauditing and endogenously determined penalty rates on tax compliance. Both features contribute to a microfoundation of agent-based econophysics models of tax evasion.