AN AGENT-BASED MODEL OF TAX COMPLIANCE: AN APPLICATION TO THE SPANISH CASE

Authored by Toni Llacer, Francisco J. Miguel, Jose A. Noguera, Eduardo Tapia

Date Published: 2013-08

DOI: 10.1142/s0219525913500070

Sponsors: Spanish government

Platforms: No platforms listed

Model Documentation: Other Narrative Flow charts Mathematical description

Model Code URLs: Model code not found

Abstract

In this paper, we present a new agent-based model for the simulation of tax compliance and tax evasion behavior (SIMULFIS). The main novelties of the model are the introduction of a “behavioral filter approach” to model tax decisions, the combination of a set of different mechanisms to produce tax compliance (namely rational choice, normative commitments and social influence), and the use of the concept of “fraud opportunity use rate” (FOUR) as the main behavioral outcome. After describing the model in detail, we display the main behavioral and economic results of 1,920 simulations calibrated for the Spanish case and designed to test for the internal validity of SIMULFIS. The behavioral outcomes show that scenarios with strict rational agents strongly overestimate tax evasion, while the introduction of social influence and normative commitments allows to generate more plausible compliance levels under certain deterrence conditions. Interestingly, the relative effect of social influence is shown to be ambivalent: it optimizes compliance under low and middle deterrence conditions, but not when deterrence is made harder. Finally, SIMULFIS economic outcomes are broadly in line with theoretical expectations, thus supporting the reliability of the model.

Tags

Social influence Rational choice tax behavior tax evasion tax morale