The Evolution of Tax Evasion in the Czech Republic: A Markov Chain Analysis

CERGE-EI Working Paper

Posted: 27 Sep 2002

See all articles by Jan Hanousek

Jan Hanousek

Faculty of Business and Economics, Mendel University in Brno; Centre for Economic Policy Research (CEPR)

Filip Palda

University of Quebec at Montreal (UQAM) - Ecole Nationale d'Administration Publique

Abstract

We use a dataset of 1062 individuals from the Czech Republic to forecast the evolution of tax evasion in that country. We ask each respondent how intensely (never, sometimes, often) he evaded taxes in 1995, 1999, and 2000, to calculate probabilities the average individual will move between these categories of evasion in any given year. These "transition" probabilities allow us to predict a rising tide of tax evasion in the next decade. We estimate the reduced form parameters which determine evasion and suggest how government might influence these parameters to prevent the Czech Republic from bogging down in a permanent mire of tax evasion.

Keywords: Tax evasion, transition economies, dynamic modelling, Czech Republic

JEL Classification: H26, H43, K42, O17

Suggested Citation

Hanousek, Jan and Palda, Filip, The Evolution of Tax Evasion in the Czech Republic: A Markov Chain Analysis. CERGE-EI Working Paper, Available at SSRN: https://ssrn.com/abstract=331841

Jan Hanousek (Contact Author)

Faculty of Business and Economics, Mendel University in Brno ( email )

Brno
Czech Republic

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Filip Palda

University of Quebec at Montreal (UQAM) - Ecole Nationale d'Administration Publique ( email )

4750 Henri-Julien (#4040)
Montreal, Quebec H2T 3E5
Canada

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