While obligatory advance tax payments do not interfere with the taxpayer ’s evasion decision under expected utility theory, they do affect the decision to evade under prospect theory. The present paper applies prospect theory to a simple model of tax evasion, exploring the role that advance...

Proposes a model of tax evasion that would apply to any tax (sales, profit, or payroll) evaded by a business. Includes an argument that a firm's level of business activity is separable from the decision to evade taxes.