A Model for Tax Evasion with Some Realistic Properties

TL;DR

This paper introduces a discrete-time dynamic model for income tax evasion that captures realistic properties and extends to a network of taxpayers, providing insights into taxpayer behavior and avoiding paradoxes.

Contribution

It presents an exactly solvable model for individual tax evasion and extends it to a network-based agent model with realistic properties.

Findings

Model avoids the Yitzhaki paradox

Exact solution for single taxpayer case

Extension to networked taxpayers

Abstract

We present a discrete-time dynamic model of income tax evasion. The model is solved exactly in the case of a single taxpayer and shown to have some realistic properties, including avoiding the Yitzhaki paradox. The extension to an agent-based model with a network of taxpayers is also investigated.