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The purpose of this study is to discuss the underlying reasons and motivations behind income tax evasion in Jordan as well as forecast the amount of evaded tax, annually, during the period 1976-1997. The study employs the monetary approach that indirectly calculates tax evasion via estimating the amount of money in circulation. A multiple-regression model is used to estimate a demand function for money in circulation in Jordan for the purpose of the study. The study concludes several important results. Foremost among them, is that income tax evasion is related to several factors, on the top of which is the economic situation. It has been also shown that income tax evasion in Jordan has, generally, followed an increasing rate during most of the studied period, and that whenever a new tax is imposed, or an old one is increased, evasion increases significantly. Moreover, the study suggests some ways that can significantly help reducing the amount of evaded tax.

Keywords: Taxes, Income tax, Tax evasion, Public finance, Jordan.