Income Tax Evasion: Some Aggregate Empirical Evidence

It is well-known that every year a substantial amount of income evades income taxation. This is obviously a significant policy problem. To solve this problem, the tax authorities must have information about the factors that taxpayers consider when deciding how much income to report on their tax returns. The need for such information has prompted a number of theoretical and empirical studies of the evasion problem. In this paper some aggregate empirical evidence on income tax evasion in the U.S. is provided. This is accomplished by specifying an aggregate tax evasion function which is estimated over the period 1947-78. The results provide (1) empirical evidence which supports some of the predictions of the microtheory, (2) insights where the theoretical results are indeterminant, and (3) an indication of the sensitivity of a measure of aggregate evasion to changes in the aggregate variables which correspond to the microtheoretical determinants of evasion. The remainder of this paper is organized in the following way. Section I contains background information on the results reported in some of the previous literature. In Section II, an empirical model is specified and estimated, and the results are presented. This is followed in Section III by brief discussion of some of the possible implications of these results, along with suggestions for further research

Nonlinear regression in tax evasion with uncertainty: a variational approach

One of the major problems in today's economy is the phenomenon of tax evasion. The linear regression method is a solution to find a formula to investigate the effect of each variable in the final tax evasion rate. Since the tax evasion data in this study has a great degree of uncertainty and the relationship between variables is nonlinear, Bayesian method is used to address the uncertainty along with 6 nonlinear basis functions to tackle the nonlinearity problem. Furthermore, variational method is applied on Bayesian linear regression in tax evasion data to approximate the model evidence in Bayesian method. The dataset is collected from tax evasion in Malaysia in period from 1963 to 2013 with 8 input variables. Results from variational method are compared with Maximum Likelihood Estimation technique on Bayeisan linear regression and variational method provides more accurate prediction. This study suggests that, in order to reduce the tax evasion, Malaysian government should decrease direct tax and taxpayer income and increase indirect tax and government regulation variables by 5% in the small amount of changes (10%-30%) and reduce direct tax and income on taxpayer and increment indirect tax and government regulation variables by 90% in the large amount of changes (70%-90%) with respect to the current situation to reduce the final tax evasion rate

Trading Off Tax Distortion and Tax Evasion

Tax evasion is modeled as a risky activity and integrated into a standard problem of optimal tax design. It is shown that there is a trade off between reducing tax evasion and reducing tax distortion. Thus it is efficient to supplement a broad-based wage tax by a tax on specific consumption if the former is evaded and the latter not. The optimal tax structure can be characterized by an explicit formula.Tax evasion, risk-taking, optimal taxation

To pay or not to pay? Citizens' views on taxation in local authorities in Tanzania

Widespread tax evasion reflected in persistent public resistance to pay is seen as part of the problem of raising local government revenues in Tanzania. Dealing with the policy problem of revenue enhancement and tax evasion requires some understanding of the factors underlying the individual's decision whether to pay or evade taxes. However, the views of taxpayers are to a large extent ignored in this policy debate. What are the experiences, priorities, and recommendations of Tanzanian citizens with respect to payment of taxes and fees? What do people feel they get in return for taxes paid? And what do they consider to be the major challenges to improving the present system? Based on data from a recently conducted citizen survey, this paper presents the perceptions of ordinary people on local government taxation.Taxation Tax evasion Tax collection Local government Tanzania

Alleviation of Fuel Tax Evasion in Kentucky (Interim Report)

Motor fuel tax evasion is a problem of major significance nationwide. In Kentucky, evasion of motor fuel taxes could mean an annual loss of approximately $25 million. This study was initiated to provide Kentucky officials involved with fuel tax collection with the best available information on the problem of fuel tax evasion and the best uses of all resources to alleviate the problem. This interim report concludes the first phase of the study and provides a qualitative look at motor fuel tax evasion in Kentucky. It discusses the fuel tax process in the Commonwealth, how evasion occurs, efforts to alleviate evasion, and preliminary findings and recommendations. Findings include the tact that fuel tax evasion by dishonest dealers places honest dealers at a major competitive disadvantage, as well as contributing to the loss of funds tor highway construction end maintenance. Kentucky is combating evasion through a combination of state and cooperative regional and national efforts. Future research will include examining three basic approaches to developing a quantitative estimate of the magnitude of fuel tax evasion in Kentucky end implementing the most promising of these approaches. Additional research could be conducted on experience gained by other states, average fuel burn rates tor various types of engines and furnaces, and a cost/benefit analysis tor Kentucky\u27s Motor Fuel Tax Audit program to justify additional funds for that program

Measurement of Value Added Tax Evasion in Selected EU Countries on the Basis of National Accounts Data

The size of tax evasion and fraud appears to be increasing steadily in the EU. To a certain extent, the completion of Single Market has further encouraged firms’ and households’ evasive behaviour in paying value added taxes in the EU Member States, whereas such efforts have traditionally been most pronounced in the field of corporate and personal income taxation. This study primarily deals with the quantification of the VAT evasion and fraud in the EU. On the basis of the national accounts data, it suggests a novel way of estimating the annual amount of hypothetical VAT revenues for the individual EU countries. The relation between the calculated hypothetical and the (current) collected revenues in a fiscal year largely determines the extent of VAT evasion and fraud of a country, when the time-lag problem between the creation of tax liability and the VAT collection in cash terms can be adjusted.

Corruption, Black Markets, and the Fiscal Problem in LDC's: Some Recent Findings

The fiscal difficulties of LDC's, and the important role for evasion as a part of them, are well-known. Drawing on the rich literature on tax evasion in the public finance literature, much recent research has shed light on two phenomena contributing to this problem: Fiscal corruption and evasion through illegal transactions. This note surveys some of this recent research

Improving rotorcraft survivability to RPG attack using inverse methods

This paper presents the results of a preliminary investigation of optimal threat evasion strategies for improving the survivability of rotorcraft under attack by rocket propelled grenades (RPGs). The basis of this approach is the application of inverse simulation techniques pioneered for simulation of aggressive helicopter manoeuvres to the RPG engagement problem. In this research, improvements in survivability are achieved by computing effective evasive manoeuvres. The first step in this process uses the missile approach warning system camera (MAWS) on the aircraft to provide angular information of the threat. Estimates of the RPG trajectory and impact point are then estimated. For the current flight state an appropriate evasion response is selected then realised via inverse simulation of the platform dynamics. Results are presented for several representative engagements showing the efficacy of the approach