Corporate Tax Payoff in A Game Theory Approach

This article investigates corporate tax payoffs in a  repeated game theory approach. An application  of mixed strategy infinitely repeated game for  corporate tax payoffs is provided with four payment  types included under new draft tax procedural law.  The Folk Theorem is used to find SPNE of infinitely  repeated game strategies. The results demonstrate  that: (1) the solution set of zero sum game is linear  and that of variable sum game is trapezoidal; (2)  Grim-trigger and Tit-for-tat of defection both are  not appropriate strategies; (3) in pure and mixed  strategy equilibrium, TRA needs high audit rates in  order to force CTP to point of indifference; (4) CTP  will prefer evading tax indefinitely and if possible  request settlement when get caught for evading  tax; and (5) the number of qualified tax inspectors  and audit rates must be increased to break the  courage of CTP evading tax.