Analyzing the Behavior of Tax Compliancy in Iran: A Game Theoretical Approach

This article tries to provide an analysis of the interactions between taxpayers and tax system based on systematic, institutional, and behavioral factors of the Iranian economy. For this goal, this study extends the behavioral model of Prinz and Pickhardt (2013) to the interactions of Iranian agents. With a game theoretical approach, this model studies the relationships of taxpayers, tax consultants, and tax authorities in three different levels, considering the previous field research about the behaviors of tax agents in the Iranian economy. The results of the study, in all the three levels, have shown that to prevent tax evasion, there should be transparency about the expenditures of tax money. Furthermore, the expectations and trusts for the government should also improve. Moreover, this writing presents that there is a “lose-lose” equilibrium in the interactions of taxpayers and tax authorities when tax consultants intervene in the interactions between these two agents. The reasons for this bad equilibrium are lack of proper legal control and transparency for taxpayers in the Iranian tax system.