The Impact of Public Income Tax Return Disclosure on Tax Avoidance and Tax Evasion - Insights from an Agent-Based Model

We investigate how public tax return disclosure affects heterogeneous taxpayers' tax avoidance and evasion decisions when they maximize the sum of private expected util-ity (in line with Allingham and Sandmo, 1972) and social utility (which rewards behavior conforming to social norms). Taxpayers are located on a small-world network and directly observe their neighbors' wealth. Depending on what tax information is disclosed (noth-ing; net income only; both gross and net income), they can infer their neighbors' behavior with varying precision. Using an agent-based simulation, we find that partial disclosure of tax return information can yield more tax revenue than full disclosure.