This paper employs two variants of the “mind game” to show how a subtle variation in the game's rules affects cheating. In both variants of the game, cheating is invisible because subjects make their choices purely in their minds. The only difference stems from the ordering of steps that...

This paper presents experimental evidence that tax compliance is path dependent. For given values of the audit probability and the fine for tax evasion, we compare the income declaration of subjects who faced a change in one of the two parameters to that of subjects who experienced no such...

Conditional audit rules are designed to achieve regulatory compliance with fewer inspections than required by random auditing. A regulator places individuals into audit pools that differ in probability of audit or severity of fine and specifies transition rules between pools. Future pool...

This chapter of the forthcoming Handbook of Law and Economics surveys the theory of the public enforcement of law %u2013 the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of our...

This chapter surveys the theory of the public enforcement of law—the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of the analysis addresses the following basic questions: Should...

The shadow (underground) economy plays a major role in many countries. People evade taxes and regulations by working in the shadow economy or by employing people illegally. On the one hand, this unregulated economic activity can result in reduced tax revenue and public goods and services, lower...

Die Debatte über Offshore-Leaks und die sehr geringen Steuerzahlungen großer multinationaler Konzerne haben das öffentliche Interesse auf das Problem „Steueroasen“ gelenkt. Wenn Konzerne Steuersatzunterschiede zwischen verschiedenen Ländern ausnutzen, kann Steuergestaltung durchaus legal...

Several studies examine the effect of tax rates on households’ labor supply decisions in attempts to account for observed differences in work hours across countries. Interestingly, these studies fail to consider a fundamental action associated with taxation: tax evasion. This paper introduces,...

This paper aims to formalise both the role of trust (in) and power (of) tax authorities as major determinants of tax compliance, and the interplay between trust and power and its influence on tax climate and overall tax compliance. Unlike the related literature that studies the role of the...

Full movement from the destination principle to the origin principle would lead to changes in VAT revenues in EU countries. Hence a clearing mechanism is necessary to rectify such imbalances. To estimate the relevance of VAT evasion this study quantifies the annual amounts of hypothetical VAT...