We model the optimal intertemporal decision of an agent who chooses tax evasion and consumption, over an infinite lifetime horizon, where consumption is driven by habits. We find the following: (i) tax evaders reduce consumption in the early stages of habit accumulation and increase it over time; (ii) habit formation has a dampening effect on tax evasion; (iii) neglecting tax evasion can lead to habit overestimation; (iv) the effect of the tax rate on tax evasion is ambiguous; (v) heavy fines are more efficient than frequent controls in reducing tax evasion.

Dynamic Tax Evasion with Habit Formation in Consumption

Bernasconi, Michele
;
2020

Abstract

We model the optimal intertemporal decision of an agent who chooses tax evasion and consumption, over an infinite lifetime horizon, where consumption is driven by habits. We find the following: (i) tax evaders reduce consumption in the early stages of habit accumulation and increase it over time; (ii) habit formation has a dampening effect on tax evasion; (iii) neglecting tax evasion can lead to habit overestimation; (iv) the effect of the tax rate on tax evasion is ambiguous; (v) heavy fines are more efficient than frequent controls in reducing tax evasion.
File in questo prodotto:
File Dimensione Formato  
Bernasconi_et_al-2019-The_Scandinavian_Journal_of_Economics.pdf

accesso aperto

Tipologia: Documento in Post-print
Licenza: Creative commons
Dimensione 30.63 MB
Formato Adobe PDF
30.63 MB Adobe PDF Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10278/3712523
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 3
  • ???jsp.display-item.citation.isi??? 4
social impact