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Extending the lessons of laboratory experiments on tax compliance to managerial and decision economics

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Author Info

  • James Alm

    (University of Colorado at Boulder, Department of Economics, Campus Box 256, Boulder, CO 80309-0256, USA)

  • Michael McKee

    (University of New Mexico, Department of Economics, Albuquerque, NM 87131, USA)

Abstract

In this paper we examine what experiments on tax compliance have revealed about compliance behavior, and we discuss what these experiments can reveal about managerial and decision economics. We draw two general conclusions from this discussion. First, compliance is a complicated decision, one that depends upon the financial incentives facing the decision-maker, including detection and punishment, but one that also depends upon many other factors that have not been considered by the standard economics-of-crime paradigm. Second, and as a consequence, broader approaches to the compliance decision are needed, ones that involve enforcement but that also encompass more complete models of behavior. Put differently, any company strategy based only on detection and punishment may well be a reasonable starting point for compliance but not a good ending point. Instead, what is needed is a multi-faceted approach that emphasizes enforcement, but that also emphasizes the broad range of motivations that explain why people obey rules and regulations. © 1998 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 19 (1998)
Issue (Month): 4-5 ()
Pages: 259-275

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Handle: RePEc:wly:mgtdec:v:19:y:1998:i:4-5:p:259-275

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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Cited by:
  1. John K. Stranlund & James J. Murphy & John M. Spraggon, 2010. "An Experimental Analysis of Compliance in Dynamic Emissions Markets," Working Papers 2010-3, University of Massachusetts Amherst, Department of Resource Economics.
  2. C. Bram Cadsby & Fei Song & Francis Tapon, 2008. "Are You Paying Your Employees to Cheat? An Experimental Investigation," Working Papers 0810, University of Guelph, Department of Economics.
  3. James J. Murphy & John K. Stranlund, 2005. "A Laboratory Investigation of Compliance Behavior under Tradable Emissions Rights: Implications for Targeted Enforcement," Working Papers 2005-1, University of Massachusetts Amherst, Department of Resource Economics.
  4. Timothy N. Cason & Lata Gangadharan, 2006. "An Experimental Study of Compliance and Leverage in Auditing and Regulatory Enforcement," Economic Inquiry, Western Economic Association International, vol. 44(2), pages 352-366, April.
  5. Urs Fischbacher & Franziska Heusi, 2008. "Lies in Disguise. An experimental study on cheating," TWI Research Paper Series 40, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  6. Murphy, James J. & Stranlund, John K., 2006. "Direct and market effects of enforcing emissions trading programs: An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 217-233, October.
  7. Tan, Fangfang & Yim, Andrew, 2010. "Deterrence Effects of Auditing Rules: An Experimental Study," MPRA Paper 27859, University Library of Munich, Germany.
  8. James, Simon & Edwards, Alison, 2010. "An annotated bibliography of tax compliance and tax compliance costs," MPRA Paper 26106, University Library of Munich, Germany.

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