Anti-Tax Revolutions and Symbolic ProsecutionsHolger C. Wolf
NBER Working Paper No. 4337 We extend the traditional tax evasion model to take account of the interaction between individual compliance decisions and perceived detection probabilities. The generalization provides a rationale for "anti-tax revolutions" characterized by a sudden shift of a significant fraction of the tax paying citizenry from compliance to tax evasion with unchanged fundamentals and monitoring rules. We establish, with an application to hyperinflation, the possibility of multiple compliance equilibria with lock-in effects. Finally, we demonstrate the potential cost effectiveness of "symbolic prosecution" as an equilibrium shifting device in preference to permanent changes the monitoring process.
Published: Kyklos, 1996. This paper is available as PDF (133 K) or DjVu (86 K) (Download viewer) or via email.
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