Incentives for the payment of property tax in Ecuador: game theory analysis

Abstract

In this research work, a game theory model is proposed to analyze the interaction between two agents, the government and the taxpayer. Such a model considers realistic assumptions related to the tax collection in Ecuador. Specifically, we assume the existence of an inspector who is in charge of collection the property tax. By describing the previous interaction as a simultaneous game, we search for the government and taxpayer equilibrium strategies. Given the features of the tax collection system, such as the possibility to bribe and the inspector’s wage, the Nash equilibrium is characterized by promoting tax evasion. Later, we discuss some actions to improve the tax collection structure in order to avoid tax evasion.