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Abstract
This paper provides empirical evaluation of a number of determinants of tax evasion by firms. The analysis includes both standard determinants, such as tax rates and probability of detection, and non-traditional factors, such as trust in government, compliance costs, and corruption. Firm-level survey data from 4,538 firms in 23 transition economies are analyzed. One of the main findings is that fighting corruption is more important in deterring tax evasion than conventional measures.

This paper develops a model for a particular type of grand corruption often encountered in developing countries, namely, the sale of government positions by autocratic rulers. A two-stage game is considered, where the autocrat moves first to maximize his revenue from the sale of positions in the cabinet by choosing a price that must be paid by interested politicians. The latter become bureaucrats who maximize their utility from bribe revenues for the given price set by the president. Backward induction yields subgame-perfect equilibrium levels of corruption of the president and bureaucrats. A key insight from this analysis is that conventional tools of fighting corruption become ineffective when corruption at the very top is ignored. The model is distinctive in its treatment of individual moral costs of being corrupt and in its consideration of a revolutionary constraint on the autocrat's choices.