The paper gives an overview of some main themes in the theory of tax evasion, starting from Allingham and Sandmo (1972). It reviews the comparative statics of the original model of individual behavior where the tax evasion decision is analogous to portfolio choice, and its extensions to incorporate socially conscious behavior, participation in the black labor market and tax evasion by firms. It also discusses the analysis of tax incidence and the problems involved in moving from individual to aggregate analysis. Finally, it reviews the issues that arise in formulating models of optimal taxation in the presence of tax evasion.
Sandmo, A. (2005). The theory of tax evasion: A retrospective view. National Tax Journal, 643-663.
https://www.jstor.org/stable/41790296
