TITLE:
Tax Compliance, Income Distribution and Social Norms
AUTHORS:
Debora Di Gioacchino, Fabrizio Patriarca
KEYWORDS:
Tax Evasion, Social Norms, Income Distribution
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.3,
April
24,
2017
ABSTRACT: This paper studies the effect of income inequality on tax evasion. To discuss the topic, we present a simple model, based on Benabouand
Tirole [1], that incorporates incentives for tax compliance
such as punishment and fines, intrinsic motivation and
social norms. Since we consider a regressive system of incentives to
comply, income inequality increases the value of tax evasion although overall
propensity to comply is unaffected. In this framework, we consider
the hypothesis that social norms are group specific as in the case
of social segregation or status related networks. We show that all the
negative effects of inequalities are amplified: the difference between
the tax compliance of the income groups and the value of tax evasion
increase.