Analysing tax evasion dynamics via the Ising model

2008/01/18 by Zaklan, Georg, Westerhoff, Frank, Stauffer, Dietrich · 2 citations
#FOS: Economics and business #FOS: Physical sciences #General Finance (q-fin.GN) #Physics and Society (physics.soc-ph)

paper · doi:10.48550/arxiv.0801.2980

Abstract

We develop a model of tax evasion based on the Ising model. We augment the model using an appropriate enforcement mechanism that may allow policy makers to curb tax evasion. With a certain probability tax evaders are subject to an audit. If they get caught they behave honestly for a certain number of periods. Simulating the model for a range of parameter combinations, we show that tax evasion may be controlled effectively by using punishment as an enforcement mechanism.

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