Negative effects of tax evasion


#1

What are the negative effects of tax evasion? None are listed when you hover over it and I don’t think it’s listed as an expense. I generally ignore it and seem to do okay.


#2

Well the negative effect is an indirect one implied by the name. High tax evasion means that taxes aren’t been paid, reducing how much you get from taxation. I think the problem with that should be obvious.


#3

I knew that, but why isn’t it listed in the expenditures like debt service and a few other indirect things?


#4

Well, it’s not technically an expenditure since you never see the money. The way it’s applied doesn’t even use those standard links. The values you see are the effect on the raw value of the statistic. TaxEvasion is used as a multiplier, taking ALL those values and multiplying them by it. (Which is why you may notice GDP changes also affect some tax values. In fact, raising GDP from 0% to 100% would apply a 5x multiplier to most taxes, including income and corporation, without even changing their slider position.) From what I can see from the policies file, tax evasion can reduce your tax income for 4 major taxes (car,corporation,income,sales) by up to a whopping 20%.

To factor tax evasion most taxes include the formula:
TaxEvasion,1.0-(0.2*x)
with “x” representing the tax evasion level from 0-1. The game then takes the result and multiplies it by your taxes’ proper value.

So if Tax Evasion was around half (0.5) the TaxEvasion multiplier would be about 0.9, and although your theoretical income tax income could be $100 million, you’d only end up getting $90 million.

Since it’s all done outside your view and already calculated into the values you see it’s easy to miss, but still plays a key part. If you’re overtaxing you may find yourself losing income rather than gaining.


#5

Actually, it’s good in a way to hide the effect. While it’s a good learning experience to see the exact mechanisms and quantities moving through a complex system, it’s a more realistic policy-making experience if things are happening around you that you can’t see directly or measure exactly. Tax evasion is one of those things (like black-market commerce) that the people especially keep hidden from the government, so it makes sense if you can’t see it clearly.