Bernasconi M., Zanardi A. (2004).

Tax evasion, tax rates, and reference dependence. FINANZARCHIV, vol. 60, pp. 422-445.

Abstract:

Using cumulative prospect theory as a notable example of reference-dependent preference, we revisit the basic portfolio model of tax evasion. We show that some controversial implications of the standard expected-utility theory, including that of a negative relationship between tax rates and evaded income, can be corrected in a direction more consistent with intuition and empirical evidence.