Embed Size (px)
DESCRIPTION
Presentation for first year PhD students at Ca' Foscari, Venice. Some research topics were surveyed.
Citation preview
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Agent-based models: tax evasion and tradingResearch day 2012
Paolo Pellizzari
1Dipartimento di EconomiaCa’ Foscari - Venezia
19 June 2012
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Agent-based models
An ABM is a computational model for simulatingthe actions and interactions of autonomousagents (individual, collective entities,organizations or groups) with a view to assessingtheir effects on the system as a whole
Microsimulation, individual-based models,heterogeneous-agents models...
1 Numerous agents at different scales2 Decision-making heuristics3 Learning and adaptation (as opposed as equilibrium)4 Interaction and environment
History: John Conway, The game of life; ThomasSchelling, segregation; Robert Axelrod, repeated prisonerdilemma; Craig Reynolds, flocks...
Agent-based models Taxation and evasion An ABM model Results Tobin tax
What ABMs are not
Equilibrium models (based on infinite rationality andknowledge)
1 How do you get to the equilibrium?2 Is the equilibrium attainable?3 Is an equilibrium realistic?
Representative agent models1 All agents are the same or behave as if they are the same2 The representative agent disagrees with all the agents in
the economy (segregation)Analytical models
1 ABMs use numerical methods, simulations, ANT...
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Taxation and evasion
Allingham and Sandmo (1972): model tax evasion as anindividual decision
1 gamble (report or cheat)2 portfolio choice (safe or risky asset)
The taxpayer maximizes
E [U] = (1 − q)U(I − τX ) + qU(I − τX − f (I − X )),
with respect to reported income X“This is hardly public economics; in fact it’s very private”,Kolm from Cowell and Gordon (1988)ABMs (and a massive body of research) take into accountpublic expenditure, heterogeneous taxpayers, distinctopportunities to cheat, networks and contagion, noisyinformation, bomb crater effects...
Agent-based models Taxation and evasion An ABM model Results Tobin tax
The slippery slope
Kirchler, Hoelzl, Wahl (2008): compliance depends onpower of tax authorities and trust in the tax authorities...there is enforced and voluntary compliance
By power of authorities, we mean taxpayers’ perception of the potential of tax o!cersto detect illegal tax evasion, for example by conducting frequent and thorough tax audits,and to punish evasion, for example by fining evaders to a noticeable extent. To a largedegree, power of authorities is related to tax legislation and the budget allocated to themby a government; to some degree, it is also related to the support from the population, forexample by being informed about misconduct. Since we focus on perception of power, thisdimension is also related to knowledge and attitudes held by the taxpayers. By trust inauthorities, we mean the general opinion of individuals and social groups that the taxauthorities are benevolent and work beneficially for the common good. Eberl (2003)describes trust as a special quality of relations, i.e., interacting partners ascribe each otherpositive aspects and intrinsic motivation to maintain the relationship. Tyler (2003) uses theterm ‘‘social trust’’ to distinguish this perspective from calculative trust.
It is assumed here that tax compliance can be achieved through increasing levels ofpower and trust; however, the resulting compliance is enforced in the former case and vol-untary in the latter case. The impact of changes in one dimension is assumed to depend onthe level of the other dimension, resulting in the stylized figure shown in Fig. 1. It showsthe proposed ‘‘slippery slope’’ framework graphically in a three-dimensional space withthe power of authorities, trust in authorities, and tax compliance as dimensions.
We start the description of the characteristics of the framework in the front corner ofFig. 1. In conditions where trust in authorities is low and the power of authorities is weak,it is likely that citizens seek to maximize their individual outcomes by evading taxes, bring-ing compliance to a minimum. (a) Moving along the left edge, along the power dimensionunder conditions of low trust, compliance increases with the power of the authorities toraise audit and detection probabilities and to inflict severe fines. Taxpayers have less andless incentives to evade, because the expected outcome of non-compliance falls below theexpected outcome of compliance. Increasing power of the authorities is likely to result inenforced compliance. The curvature results from an assumption of diminishing returns:
Powerof authorities
Compliance
High
Enforcedtax compliance
Voluntary tax compliance
Maximum
High
LowLow
Minimum Trustin authorities
Fig. 1. The ‘‘slippery slope’’ framework: enforced tax compliance and voluntary tax compliance depending on thepower of the authorities and trust in the authorities.
212 E. Kirchler et al. / Journal of Economic Psychology 29 (2008) 210–225
The slippery slope and the tax morale dynamically evolve
Agent-based models Taxation and evasion An ABM model Results Tobin tax
An ABM model
N heterogeneous agents have utility
Ui = Ui(yi ,Gi).
We assume multiplicative utility
Ui =1
1 − ρi
[yiG
αii
](1−ρi ) .
Amount paid by an individual is
Ti = τdi Ii = τXi .
yi after tax income;Gi perceived per capita public expenditure;ρi relative risk aversion parameter;αi relative intensity of preference public/personal;Ii exogenous income;di fraction of declared income.
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Individual behavior: low vs high α
Taxation should not exceed one third ofwealth. More than that? It’s a robbery.
Silvio Berlusconi: low α!
Taxes are a beautiful thing because they are acivilized way of contributing to the common good.
T. Padoa-Schioppa: shockingly high α.
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Individual behavior: low vs high α
Taxation should not exceed one third ofwealth. More than that? It’s a robbery.
Silvio Berlusconi: low α!
Taxes are a beautiful thing because they are acivilized way of contributing to the common good.
T. Padoa-Schioppa: shockingly high α.
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Individual behavior: low vs high α
Taxation should not exceed one third ofwealth. More than that? It’s a robbery.
Silvio Berlusconi: low α!
Taxes are a beautiful thing because they are acivilized way of contributing to the common good.
T. Padoa-Schioppa: shockingly high α.
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Societal slippery slope
The slope depends on the distribution of individual traits. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
33
Figure 3 – Simulated slippery slope: societal compliance rate
a) tax rate = 20% b) tax rate = 30%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
b) with tax rate = 40% c) with tax rate = 50%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
6. Conclusion
We have described an agent-based model of individual tax compliance where heterogeneous
agents maximize utility under risk based on several individual features, like their preference
for public expenditure, personal attitude to comply, consideration of reaction by other
taxpayers and risk aversion. Decisions obviously depend on individual traits but also on
perceived quality and quantity of the per capita public expenditure and on the recognition that
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Societal slippery slope
The slope depends on the distribution of individual traits. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
33
Figure 3 – Simulated slippery slope: societal compliance rate
a) tax rate = 20% b) tax rate = 30%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
b) with tax rate = 40% c) with tax rate = 50%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
6. Conclusion
We have described an agent-based model of individual tax compliance where heterogeneous
agents maximize utility under risk based on several individual features, like their preference
for public expenditure, personal attitude to comply, consideration of reaction by other
taxpayers and risk aversion. Decisions obviously depend on individual traits but also on
perceived quality and quantity of the per capita public expenditure and on the recognition that
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Societal slippery slope
The slope depends on the distribution of individual traits.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
33
Figure 3 – Simulated slippery slope: societal compliance rate
a) tax rate = 20% b) tax rate = 30%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
b) with tax rate = 40% c) with tax rate = 50%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
6. Conclusion
We have described an agent-based model of individual tax compliance where heterogeneous
agents maximize utility under risk based on several individual features, like their preference
for public expenditure, personal attitude to comply, consideration of reaction by other
taxpayers and risk aversion. Decisions obviously depend on individual traits but also on
perceived quality and quantity of the per capita public expenditure and on the recognition that
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Societal slippery slope
The slope depends on the distribution of individual traits.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
33
Figure 3 – Simulated slippery slope: societal compliance rate
a) tax rate = 20% b) tax rate = 30%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
b) with tax rate = 40% c) with tax rate = 50%
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
0.10.2
0.30.4
0.50.6
0.70.8
0.91
0.10.2
0.30.4
0.50.6
0.70.8
0.91.0 0
0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.951
power indextrust index
6. Conclusion
We have described an agent-based model of individual tax compliance where heterogeneous
agents maximize utility under risk based on several individual features, like their preference
for public expenditure, personal attitude to comply, consideration of reaction by other
taxpayers and risk aversion. Decisions obviously depend on individual traits but also on
perceived quality and quantity of the per capita public expenditure and on the recognition that
Agent-based models Taxation and evasion An ABM model Results Tobin tax
The Tobin tax “revival”
Agent-based models Taxation and evasion An ABM model Results Tobin tax
The Tobin tax “revival”
Agent-based models Taxation and evasion An ABM model Results Tobin tax
The Tobin tax “revival”
Agent-based models Taxation and evasion An ABM model Results Tobin tax
The Tobin tax “revival”
Agent-based models Taxation and evasion An ABM model Results Tobin tax
The Tobin tax “revival”
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Theoretical (vs empirical) side
James Tobin proposed a tax on all currency trades. If the idea isapplied to financial assets the tax is dubbed transaction tax (TT).The intended effect was originally to put a penalty on short-termspeculation and cushion price fluctuations.
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Theoretical (vs empirical) side
The idea can be traced back to Keynes (1936):
The introduction of a substantial Government trans-fer tax on all transactions might prove the most ser-viceable reform available, with a view to mitigating thedominance of speculation over enterprises. . .
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Theoretical (vs empirical) side
Barack Obama on financial risk-taking, January 20th 2010:
The fact is, these kinds of trading operations can crea-te enormous and costly risks. . . This kind of trading of-ten puts banks in direct conflict with their customers’interests. . .So if these folks want a fight, it’s a fight I’m ready tohave.
Agent-based models Taxation and evasion An ABM model Results Tobin tax
(theoretical vs) Empirical side
There are “few” cases of practical application of a TT,hence ingenuity is needed to assess the empiricalevidenceHau (2006) showed that bigger transaction costs do notreduce the volatility of the Paris BourseHu (1998), quite politely wrote “the evidence is notconsistent with the hypothesis that stock transaction taxcan reduce trading and volatility”Umlauf (1993) analyzed the Swedish market where a TTwas in place for years. . . almost all trades moved to theLondon Stock Exchange!
Agent-based models Taxation and evasion An ABM model Results Tobin tax
ABMs: comparison of Dealership vs CDA
Taken from Pellizzari and Westerhoff (2009)
1 Realistic market modelOur heterogeneous agents (myopic, F, C, N + switching)produce returns with reasonable stylized facts (not shown)
2 Reconcile theoretical and empirical literatureIn theory there is infinite liquidity that is insteadendogenously fluctuating in real markets
3 Is the tax working?
Agent-based models Taxation and evasion An ABM model Results Tobin tax
ABMs: comparison of Dealership vs CDA
Taken from Pellizzari and Westerhoff (2009)
1 Realistic market modelOur heterogeneous agents (myopic, F, C, N + switching)produce returns with reasonable stylized facts (not shown)
2 Reconcile theoretical and empirical literatureIn theory there is infinite liquidity that is insteadendogenously fluctuating in real markets
3 Is the tax working?
Agent-based models Taxation and evasion An ABM model Results Tobin tax
ABMs: comparison of Dealership vs CDA
Taken from Pellizzari and Westerhoff (2009)
1 Realistic market modelOur heterogeneous agents (myopic, F, C, N + switching)produce returns with reasonable stylized facts (not shown)
2 Reconcile theoretical and empirical literatureIn theory there is infinite liquidity that is insteadendogenously fluctuating in real markets
3 Is the tax working?
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Does the tax work?
1 Reduction in volumeThe turnover is notably reduced in all protocols, due toinactivity of most short-term agents
2 Reduction in volatilityReduction in a CDA is negligible (as predicted by empiricalpapers). However, if exogenous liquidity is provided(Dealership) price fluctuations are dampened
3 Reduction in distortionThere is (almost) no effect in both markets. Hence, the taxis unlikely to make prices closer to fundamentals
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Does the tax work?
1 Reduction in volumeThe turnover is notably reduced in all protocols, due toinactivity of most short-term agents
2 Reduction in volatilityReduction in a CDA is negligible (as predicted by empiricalpapers). However, if exogenous liquidity is provided(Dealership) price fluctuations are dampened
3 Reduction in distortionThere is (almost) no effect in both markets. Hence, the taxis unlikely to make prices closer to fundamentals
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Does the tax work?
1 Reduction in volumeThe turnover is notably reduced in all protocols, due toinactivity of most short-term agents
2 Reduction in volatilityReduction in a CDA is negligible (as predicted by empiricalpapers). However, if exogenous liquidity is provided(Dealership) price fluctuations are dampened
3 Reduction in distortionThere is (almost) no effect in both markets. Hence, the taxis unlikely to make prices closer to fundamentals
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Does the tax work?
1 Reduction in volumeThe turnover is notably reduced in all protocols, due toinactivity of most short-term agents
2 Reduction in volatilityReduction in a CDA is negligible (as predicted by empiricalpapers). However, if exogenous liquidity is provided(Dealership) price fluctuations are dampened
3 Reduction in distortionThere is (almost) no effect in both markets. Hence, the taxis unlikely to make prices closer to fundamentals
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Good readings
1 Joshua M. Epstein et al., Toward a Containment Strategyfor Smallpox Bioterror: An Individual-Based ComputationalApproach, book, wp...
2 Korobow, A., Johnson, C., Axtell, R. (2007). AnAgent-based Model of Tax Compliance with SocialNetworks, National Tax Journal, vol. 60(3), 589-610
3 Ronald L. Goettler, Christine A. Parlour, Uday Rajan,Equilibrium in a Dynamic Limit Order Market, The Journalof Finance, Vol. 60, No. 5 (Oct., 2005), pp. 2149-2192Thank you
Agent-based models Taxation and evasion An ABM model Results Tobin tax
Good readings
1 Joshua M. Epstein et al., Toward a Containment Strategyfor Smallpox Bioterror: An Individual-Based ComputationalApproach, book, wp...
2 Korobow, A., Johnson, C., Axtell, R. (2007). AnAgent-based Model of Tax Compliance with SocialNetworks, National Tax Journal, vol. 60(3), 589-610
3 Ronald L. Goettler, Christine A. Parlour, Uday Rajan,Equilibrium in a Dynamic Limit Order Market, The Journalof Finance, Vol. 60, No. 5 (Oct., 2005), pp. 2149-2192Thank you
![1st Scientific day 2012 - جامعة الملك فيصلkfu.edu.sa/en/Colleges/clinical_pharmacy/Documents... · 1st Scientific day 2012 [Type the document subtitle] Research Activity](https://img.dokumen.tips/doc/110x75/5ec2a18cb921f958a505d3f2/1st-scientific-day-2012-f-kfuedusaencollegesclinicalpharmacydocuments.jpg)
