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Perceptions and outcomes of a fiscal bonus: Framing effects on evaluations and usage intentions

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  • Lozza, Edoardo
  • Carrera, Sonia
  • Bosio, A. Claudio
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    Abstract

    Is presenting a fiscal bonus as an income increase (a gain) the same as presenting it as a tax rebate (a loss reduction)? This paper aims to answer this question with two studies. Study 1 is a survey carried out in Italy to explore citizens' perceptions of a fiscal reform introduced in 2005. It shows both effects imputable to the methods used to describe the bonus and differences between respondents belonging to different occupational groups. But it does not allow disentangling these factors. Study 2 aims to investigate whether and how (1) the frame used to describe a fiscal bonus and (2) taxpayers' occupational status, influence their evaluation of this tax reduction and the uses they intend to make of it. To this end, 252 participants belonging to different occupational groups were submitted to two between-subject framing conditions (the bonus being described as a reduced loss or as a gain). They were then asked to evaluate the bonus' importance for their personal wealth and to state how they intended to use it. Results demonstrate that the frame, rather than the occupational status of the respondent, influences taxpayers' responses to the bonus. Respondents attached a higher importance to the bonus and were keener to save it when it was described as a loss reduction, compared to it being presented as a gain. These results are interpreted with reference to Prospect Theory, producing new insights into the processes through which framing can affect fiscal policy evaluations. The study is also relevant from a pragmatic perspective, as it shows that the way fiscal policy is communicated can be decisive for the achievement of economic and political goals.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 31 (2010)
    Issue (Month): 3 (June)
    Pages: 400-404

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    Handle: RePEc:eee:joepsy:v:31:y:2010:i:3:p:400-404

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    Web page: http://www.elsevier.com/locate/joep

    Related research

    Keywords: Framing Rebate Taxation;

    References

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    1. Matthew D. Shapiro & Joel Slemrod, 2001. "Consumer Response to Tax Rebates," NBER Working Papers 8672, National Bureau of Economic Research, Inc.
    2. Kirchler, Erich & Maciejovsky, Boris, 2001. "Tax compliance within the context of gain and loss situations, expected and current asset position, and profession," Journal of Economic Psychology, Elsevier, vol. 22(2), pages 173-194, April.
    3. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    4. Robben, Henry S. J. & Webley, Paul & Weigel, Russell H. & Warneryd, Karl-Erik & Kinsey, Karyl A. & Hessing, Dick J. & Martin, Francisco Alvira & Elffers, Henk & Wahlund, Richard & Van Langenhove, Luk, 1990. "Decision frame and opportunity as determinants of tax cheating : An international experimental study," Journal of Economic Psychology, Elsevier, vol. 11(3), pages 341-364, September.
    5. Epley, Nicholas & Gneezy, Ayelet, 2007. "The framing of financial windfalls and implications for public policy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(1), pages 36-47, February.
    6. Chang, Otto H. & Nichols, Donald R. & Schultz, Joseph J., 1987. "Taxpayer attitudes toward tax audit risk," Journal of Economic Psychology, Elsevier, vol. 8(3), pages 299-309, September.
    7. Ashby, Julie S. & Webley, Paul & Haslam, Alexander S., 2009. "The role of occupational taxpaying cultures in taxpaying behaviour and attitudes," Journal of Economic Psychology, Elsevier, vol. 30(2), pages 216-227, April.
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