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The regression line will be:
i) ITEt=-52.59-0.20PRt-1.48PROBt
ii) For any coefficient of the independent variables that is above the t value at o.o5 significance level is
eliminated.
Note: This should not be followed as a rule generally. Here it has been used since there in no
much information about the standard error of regression and the correlation coefficient. Otherwise
the main aim is to include the variables that give the least standard error and highest coefficient of
determination.
iii) The –52.59 constant term indicates that people usually pay up their taxes without evading. The
33.44 coefficient of true income indicated that people would tend to evade tax more when their
income is increased. The –1.48 coefficient of probability of detection indicates that people will tend
to reduce evasion when they realize there are higher probabilities of being detected.
iv) From the regression results, it is true, that it had a negative influence on income tax evasion.
raphael answered the question on January 10, 2019 at 12:18
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