Corporate Tax Payoff in A Game Theory Approach

This article investigates corporate tax payoffs in a repeated game theory approach. An application of mixed strategy infinitely repeated game for corporate tax payoffs is provided with four payment types included under new draft tax procedural law. The Folk Theorem is used to find SPNE of infinitely repeated game strategies. The results demonstrate that: (1) the solution set of zero sum game is linear and that of variable sum game is trapezoidal; (2) Grim-trigger and Tit-for-tat of defection both are not appropriate strategies; (3) in pure and mixed strategy equilibrium, TRA needs high audit rates in order to force CTP to point of indifference; (4) CTP will prefer evading tax indefinitely and if possible request settlement when get caught for evading tax; and (5) the number of qualified tax inspectors and audit rates must be increased to break the courage of CTP evading tax.

Keywords:

Repeated games, business tax tax evasion, tax law,

PDF

___

Abreu, D. And Rubinstein, A. (1988) “The Structure of Nash Equilibrium in Repeated Games with Finite Automata” Econometrica, 56(6): 1259-1281.
Arrow, K. J. and Honkapohja, S. (1985). ""What Is Game Theory Trying to Accomplish?" Frontiers of Economics, Oxford.
Fukofuka, P. (2013) “The Contextual Framework of Corporate Income Tax Evasion” Journal of Accounting And Taxation, 5(2): 27-37.
Hart, S. (2006) “Robert Aumann’s Game and Economic Theory” Scand. J. of Economics, 108(2): 185–211, DOI: 10.1111/j.1467-9442.2006.00448.x.
Hinriches, H.H. (1969) “Game Theory and the Rational Tax Evader” Journal of Financial Research Center Conferences, 19: 123-132.
Kalai, E., Samet, D. and Stanford, W. (1988) “A Note on Reactive Equilibria in the Discounted Prisoner's Dilemma and Associated Games” International Journal of Game Theory, 17(3): 177-186.
Luce, R. D. and Raiffa H. (1957) “Games and Decisions Introduction and Critical Survey”, Reprinted edition, New York.
Matsushima, H. (2014) “Interlinkage and Generous Tit-for-Tat Strategy” Japanese Economic Review, 65: 116–121. doi:10.1111/jere.12014.
Megiddo, N. (1994), “Essays in Game Theory in Honor of Michael Maschler”, Springer-Verlag, New York.
Nash, J. F. (1950) "Equilibrium Points in n-Person Games" Proceedings of the National Academy of Sciences, 36: 48- 49.
Nash, J. F. (1951) “Non-Cooperative Games” Annals of Mathematics, 54: 286–295.
Nayyar S. (2009) “Essays On Repeated Games”, PhD Dissertation, Princeton University. WEB REFERENCES
Knight, V. (2017), “Finitely Repeated Games”, http:// Vknight/Year_3_game_theory_course/ content/ chapter_09_Finitely_Repeated_Games, (16.06.2017)
MIT OpenCourseWare (2012), “Economic Applications of Game Theory”, http://ocw.mit.edu, (27.07.2017)
Hitzig Z., Hoffman M., and Yoeli E. (2013), “Pure Strategy Matrix Form Games and Nash Equilibria”, https://ocw. mit.edu/courses/economics/14-11-insights-fromgame- theory-into-social-behavior-fall-2013/studymaterials/ MIT14_11F13_Pure_strategy.pdf
Presidency Of Tax Administration For Large-Scaled Taxpayers, PTALST (2009), “Tax Procedure Law”, http:// www.bmvdb.gov.tr/ozelgeler/2009/vuk/17600.htm , (25.08.2016)
TACOM (2016), “Tax Audit Committee 2012-2015 Activity Reports”, http://www.vdk.gov.tr/default.aspx?nsw=dc iSsil8zCRLPP9XnV0K5Q==-H7deC+LxBI8=&nm=1048, (10 August 2016)
Tax Inspectors Foundation (2016), “An Example For a Limited Company Audited”, http://www.vmv.org.tr/ Yay%C4%B1n/10, (28.05.2016)
TRA Turkish Revenue Administration, (1997), “First Degree Irregularity Fine”, http://www.gib.gov.tr/ node/92122, (25.08.2016)
TRA (2016a), “The Number of Active CTPs”, http:// www.gib.gov.tr/fileadmin/user_ upload/VI/20151. htm, (01.08. 2016)
TRA (2016b), “Central Government Budget Revenues”, http://www.gib.gov.tr/ fileadmin/user_upload/VI/GBG/ Tablo_22.xls.htm, (08.08.2016)
TRA (2007), “Settlement in Resolving Tax Disputes With The Tax Administration”, www.gib.gov.tr/fileadmin/ user_upload/yayinlar/uzlasma.pdf, (28.06.2016)
TRA (2016c), “Strategy Development Department 2011- 2015 Activity Reports”, http://www.gib.gov.tr/kurumsal/ stratejik-yonetim/faaliyet-raporlari, (10.05.2016)
TRA (2016d), “Special Irregularity Fine”, http://www.gib. gov.tr/node/83111 , (28.08.2016)
TRA (1961), “Tax Procedure Law”, http://www.gib.gov. tr/fileadmin/mevzuatek/gerekceler/ VUK/vuk_gerekce. pdf, (19.08.2016)
Yavaslar, F.B. (2015), “Surcharges and penalties in tax law. Turkey’s National Report”, www.eatlp.org/ uploads/public/2015/National%20report%20Turkey. pdf, (04.05.2016)

ISSN: 1303-099X
Yayın Aralığı: Yılda 4 Sayı
Başlangıç: 2000
Yayıncı: Ege Üniversitesi

Arşiv