Analysing tax evasion dynamics via the Ising model

• DOI: 10.1007/s11403-008-0043-5
• Publication Date: 2009-01-22T05:04:29Z
• Authors: Georg Zaklan; Frank Westerhoff; Dietrich Stauffer
• Keywords: Physics - Physics and Society; 05 social sciences; FOS: Physical sciences; Physics and Society (physics.soc-ph); 16. Peace & justice; 01 natural sciences; FOS: Economics and business; 0502 economics and business; 0103 physical sciences; Quantitative Finance - General Finance; General Finance (q-fin.GN)

15 pages including figures and the Fortran program<br/>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.<br/>