Supervised tax compliance and evasion from a spatial evolutionary game perspective

2026-02-26

AI Summary

This study addresses the public goods provision dilemma arising from the coexistence of tax evasion and regulatory corruption in taxation systems. It proposes a two-layer interdependent network model that, for the first time, integrates citizens’ tax compliance behavior and regulators’ enforcement strategies within a spatial evolutionary game framework, enabling their co-evolution. The authors simulate the impact of governmental institutional interventions—including penalty mechanisms, salary incentives, and anti-corruption measures—on the dynamics of tax compliance. The analysis reveals a nonlinear relationship between bribery and institutional fairness, demonstrating that stricter penalties, higher regulator compensation, and effective anti-corruption efforts significantly enhance both tax compliance rates and the proportion of fair enforcement. These findings offer theoretical support for optimizing tax governance through targeted institutional design.

Technology Category

• Game Theory and Economic Paradigms: Coordination and Collaboration
• Multiagent Systems: Mechanism Design
• Search and Optimization: Other Foundations of Search & Optimization

Application Category

• Economics, Online Markets and Human Computation: Incentives in network design for Web infrastructures and ecosystems
• User Modeling, Personalization and Recommendation: Accountability, Transparency, and Ethics for personalization
• Web Mining and Content Analysis: Models for Web evolution

Abstract

Taxation constitutes a fundamental component of modern national economic systems, exerting profound impacts on both societal functioning and governmental operations. In this paper, we employ an interdependent network approach to model the coevolution between citizens and regulators within a taxation system that fundamentally constitutes a public goods game framework with complex interactive dynamics. In a game layer, citizens engage in public goods games, facing the social dilemma of tax compliance (cooperation) versus evasion (defection). Tax compliance supports the sustainability of public finances while tax evasion presents markedly stronger short-term incentives. In a regulatory layer, fair regulators punish tax evaders, while corrupt regulators keep silent due to bribes. Governmental regulatory interventions introduce critical institutional constraints that alter the traditional equilibrium of the game. Importantly, there exists a strategy update not only among citizens but also among regulators. Our results indicate that strengthening penalties can effectively curb tax evasion, and the influence of bribery on both tax compliance rates and the proportion of fair regulators is nonlinear. Additionally, increasing regulators' salaries and intensifying the crackdown on corrupt regulators can foster the emergence of fair regulators, thereby reducing tax evasion among citizens. The results offer practical policy implications, suggesting that balanced deterrence and institutional fairness are essential to sustaining compliance, and point to the need for future empirical validation and model extensions.

Problem

• tax compliance
• tax evasion
• corruption
• public goods game
• regulatory enforcement

Innovation

• interdependent network
• spatial evolutionary game
• tax compliance
• regulatory coevolution
• institutional fairness