DOI: 10.51803/yssr.1831209 ISSN: 2149-4363

Evolutionary Dynamics of Tax Compliance under Institutional Trust

Lyu Jia-Ying
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This study investigates the co-evolutionary dynamics of tax compliance under the influence of institutional trust and punishment, integrating the micro-level Public Goods Game (PGG) with macro-level institutional quality, proxied by the World Bank Governance Indicators (WGI). We develop an Agent-Based Model (ABM) using the Mesa framework, where institutional trust (T) modulates the perceived return on public goods, thereby affecting the evolutionary payoff of compliant agents. Simulation results demonstrate that institutional trust acts as a strategic complement to deterrence. In high-trust environments (T=0.8), high compliance rates (PC* > 0.9) are achieved with minimal enforcement effort, while low-trust environments (T=0.2) require disproportionately high fine rates (f > 8.0) to maintain even moderate compliance. The findings provide a dynamic validation of the Slippery Slope Framework, showing that the effectiveness of coercive power is fundamentally mediated by institutional legitimacy. The study concludes that prioritizing governance quality is the most efficient long-term strategy for fostering stable tax compliance, shifting the policy focus from mere deterrence to building a robust social contract.

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