  We develop a model of tax evasion based on the Ising model. We augment the
model using an appropriate enforcement mechanism that may allow policy makers
to curb tax evasion. With a certain probability tax evaders are subject to an
audit. If they get caught they behave honestly for a certain number of periods.
Simulating the model for a range of parameter combinations, we show that tax
evasion may be controlled effectively by using punishment as an enforcement
mechanism.
