Behavioural Economics and Tax Evasion: Calibrating an Agent-based Econophysics Model with Experimental Tax Compliance Data

Authors

  • Cécile Bazart LAMETA, University of Montpellier 1, UFR Economie, Montpellier, France
  • Aurélie Bonein CREM, Department of Economics, University of Rennes 1, Rennes, France
  • Sascha Hokamp CEN, Research Unit Sustainability and Global Change, University of Hamburg, Hamburg, Germany
  • Götz Seibold Brandenburg University of Technology Cottbus-Senftenberg, Faculty 1, Institute of Physics, Cottbus, Germany

Keywords:

Tax Evasion, Tax Compliance Experiments, Agent-Based Model, Behavioural Economics, Econophysics, Calibration

Abstract

We observe in the literature a persistent lack of calibrating agent-based econophysics tax evasion models. However, calibrations are indispensable to the quantitative and predictive application of such computational simulation approaches. Therefore, we analyse individual data from two tax compliance experiments with social interaction: from information on tax enforcement measures in groups with income heterogeneity, where the audit probability is known and audit results are publicly and officially announced; and from information about the mean reported income of other group members in the previous period. In our agent-based econophysics simulation, we implement recent advances in behavioural economics, for instance to describe social interactions within a population of behaviourally heterogeneous taxpayers. For this purpose, we employ experimental data showing a bimodal distribution which allows us to apply Ising’s description of magnetism, a model adopted from statistical physics that can be related to binary choice models. We restrict agents in our econophysics framework to show selfish, imitating, ethical or random motives in their decisions to declare income. We find that the subjects in the experimental laboratory pursue rather mixed behaviour, including random and imitating motives.

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Volume 2.1 of JOTA - Bazart et al. Cover

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Published

07-04-2016

How to Cite

Bazart, C., Bonein, A., Hokamp, S., & Seibold, G. (2016). Behavioural Economics and Tax Evasion: Calibrating an Agent-based Econophysics Model with Experimental Tax Compliance Data. Journal of Tax Administration, 2(1), 126–144. Retrieved from https://journals.docuracy.co.uk/jota/article/view/140