Tax compliance with uncertain income: a stochastic control model

This paper examines the compliance behaviour of a taxpayer endowed with a stochastic income, taking into account dynamical factors as public and private investments, within a stochastic control framework. Assuming logarithmic utilities and thanks to a suitable rewrite of the problem, we provide an e...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:Annals of operations research Jg. 261; H. 1-2; S. 289 - 301
Hauptverfasser: Spartà, Gaetano T., Stabile, Gabriele
Format: Journal Article
Sprache:Englisch
Veröffentlicht: New York Springer US 01.02.2018
Springer
Springer Nature B.V
Schlagworte:
Algorithms
Business and Management
Combinatorics
Computer simulation
Confidence intervals
Income
Investments
Mathematical models
Monte Carlo simulation
Numerical analysis
Operations research
Operations Research/Decision Theory
Optimal control
Original Paper
Parameter sensitivity
Personal income
Sensitivity analysis
Statistical analysis
Stochastic models
Stochastic processes
Studies
Tax evasion
Tax research
Taxation
Taxpayer compliance
Theory of Computation
Utilities
Stochastic income
Stochastic control
Tax evasion
HJB equation
ISSN:0254-5330, 1572-9338
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
Beschreibung
Zusammenfassung:This paper examines the compliance behaviour of a taxpayer endowed with a stochastic income, taking into account dynamical factors as public and private investments, within a stochastic control framework. Assuming logarithmic utilities and thanks to a suitable rewrite of the problem, we provide an existence and uniqueness result for the solution of the Hamilton–Jacobi–Bellman equation associated to the control problem, and we rely on a symbolic and numerical algorithm to study its solution. Moreover, we implement a Monte Carlo simulation in order to determine an estimate of the mean and the variance of the total declared income together with a confidence interval. To illustrate how the method works, we present a computational example where we assign values to the parameters. In this case we perform a sensitivity analysis, showing how the total declared income is affected by public and private investments, probability of being discovered, fine, tax rate and income uncertainty.
Bibliographie:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
ISSN:0254-5330
1572-9338
DOI:10.1007/s10479-017-2618-9