A Note on Tax Evasion as a Function of the Quality of Information about the Magnitude and Credibility of Threatened Fines: Some Preliminary Research

In a pame-simulation context, tax evasion behavior of 13 subjects was observed. The probability that tax evasion will be detected and fined appears to be a more effective deterrent than the size of such fines, although both the magnitude of finm and their probability affect tax evasion. Vague information about the probability that fines will be imposed enhances the deterrent power of low probability audits and small fines.