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Title: 

Exploring Tax Evasion in the Context of Political Uncertainty

Authors: Katz, Barbara G.
Owen, Joel
Keywords: Tax evasion, political uncertainty, economic uncertainty;policy uncertainty, economies in transition
Issue Date: 27-Nov-2012
Abstract: We present a model of agents facing the uncertainty of two future forms of government who are able to insure against this uncertainty by hiding funds from taxation. In order to choose whether or not to hide funds from taxation, agents need to know policy choices that each government would make should it come to power. But each government, before it could make its decision, would need to know the choices of the agents who would, for example, produce tax revenues. This informational tension is resolved endogenously. We derive the resulting level of tax evasion in society and the optimal choices made by the potential governments. We examine how changes in governmental structure would affect the level of tax evasion, and how that, in turn, would affect a particular form of capital flight.
URI: http://hdl.handle.net/2451/31654
Rights: Copyright Barbara G. Katz and Joel Owen, November 2012.
Appears in Collections:Economics Working Papers

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