The Epidemiology of Tax Avoidance Narratives

34 Pages Posted: 27 Jun 2017 Last revised: 27 Aug 2021

See all articles by Johannes Lorenz

Johannes Lorenz

Carl von Ossietzky University of Oldenburg; TRR 266 Accounting for Transparency

Markus Diller

University of Passau

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business; TRR 266 Accounting for Transparency

Date Written: August 18, 2021

Abstract

This study investigates the contagious nature of tax avoidance by examining how narratives affect tax avoiding behavior. We adapt the idea of narrative economics indicating that individuals' actions are stimulated by stories that spread within a society. We employ two types of infection models to theoretically investigate how tax avoidance schemes spread over time and vanish eventually consistent with patterns known from epidemiology. We find that general tax avoidance can persist even if its expected outcome is negative, while specific tax avoidance schemes might vanish even though their expected outcome is positive. We find empirical support for the predicted dissemination of narratives related to both general and specific tax avoidance schemes in google n-grams. Finally, we show that dissemination of specific tax avoidance schemes is attenuated by anti-narratives in (social) media. Our findings help to understand how tax avoidance spreads, under what conditions anti-avoidance measures can effectively curb tax avoidance and point towards the crucial role of transparency of enhanced enforcement by visible narratives.

Keywords: tax avoidance, tax evasion, epidemiology, contagion, SIS-model, SIR-model, n-grams

JEL Classification: H26, C73, K34

Suggested Citation

Lorenz, Johannes and Diller, Markus and Sureth-Sloane, Caren, The Epidemiology of Tax Avoidance Narratives (August 18, 2021). TRR 266 Accounting for Transparency Working Paper Series No. 59, WU International Taxation Research Paper Series No. 2021-06, Available at SSRN: https://ssrn.com/abstract=2992732 or http://dx.doi.org/10.2139/ssrn.2992732

Johannes Lorenz (Contact Author)

Carl von Ossietzky University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, 26129
Germany

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

Markus Diller

University of Passau ( email )

Innstrasse 27
Passau, 94032
Germany

Caren Sureth-Sloane

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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