Prospect Theory; New Approach in Explaining Tax Evasion Phenomenon

Document Type : Research Paper


1 PhD Candidate in Economics, Faculty of Management, Department of Economics, Arak branch, Islamic Azad University, Iran

2 Professor of Economics, Payame Noor University, Iran

3 Associate Professor of Economics, University of Tehran


Tax evasion analysis is typically based on an expected utility theory (EUT). However, this leads to several qualitative and quantitative puzzles. Literature on tax evasion, it is believed that increasing the tax rate, the tax evasion also increased. So why don’t most of taxpayers evade? There is not enough evidence to prove the above results. In this paper, using the theory by Kahneman and Tversky prospect that was first introduced in 1979, to consider the problem of tax evasion. Compare the results of the calculation of tax crimes, using both theories states that there is big difference between the perspective theory and the theory of expected utility. Crimes obtained obtained by using the theory of expected utility are much larger . Prospect theory with regard to behavioral factors governing the decision to study the behavior of tax payers states as well.


Main Subjects

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  • Receive Date: 18 April 2017
  • Revise Date: 13 September 2017
  • Accept Date: 11 December 2017
  • First Publish Date: 21 March 2018