Abstract

The Portfolio Investment Framework, the Principal Agent Framework and the Principal Two Agents Framework of tax evasion, individually or collectively, are inadequate to represent fairly the dynamics of corporate income tax evasion. These behavior based frameworks are for the prediction of tax evasion and their usefulness for identifying tax evasion is limited. To bridge the gap between the prediction and the identification aspects of corporate income tax evasion, this paper presents the Contextual Framework of Corporate Income Tax Evasion, structured with twelve ideas and thirty five dynamics to guide and direct future research. With a simple game theory model, the paper promotes the tax audit cut-off policy that incorporates a reward program for the agent of government, ensures audit frequency and tests independence of the agent from governance.

Key words: Portfolio Investment Framework, Principle Agent Framework, Principle Two Agent Framework, Tax Evasion, Corporate Income Tax Evasion.