Tax Evasion and Moral Constraints: some Experimental Evidence

Tax evasion has been mainly studied as a problem of choice under uncertainty like any portfolio manager, the taxpayer has to allocate her/his fixed gross income between two assets: a risky asset, tax evasion, and a safe asset (with a zero return), tax payment. Tax evasion activity is risky because there is a certain probability that tax evasion will be discovered and punished. As suggested by the portfolio theory, the taxpayer's choice will be affected by her/his preferences, - mainly by her/his attitude towards risk-taking - and by the return on the risky asset determined by the tax structure, which includes both the tax rate and the penalties in the case of evasion. However, the pure gamble model appears unsatisfactory on various grounds . Among these and most importantly for our purpose, it neglects the psychological aspects of the decision to evade tax because it rules out any feeling of shame about evading or by being detected and punished, and it ignores any intrinsic pleasure fr..