A Theoretical Analysis on Personal Income Tax Evasion: Based on the Condition of Improved Information Structure

Abstract

As one of important and stable sources of China's fiscal revenue, personal income tax has been recognized as most serious loss of tax revenue, which is named the first difficulty of tax collection and management. It is significant to make a comprehensive analysis on both sides of taxing process in micro-game model. This paper expands traditional model concerning area of personal income tax in two parts: (1) during process of tax collection, individual tax evasion completely is set to some tax evasion, (2) tax authorities make external variables-tax audit information as transparent and symmetrical as possible. The result shows that change of information structure in process of personal income tax collection is key to solve problem of tax evasion. Basis on this, some valuable conclusions are suggested for practical institution of tax authorities.