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Tax Evasion, Welfare Fraud, and "The Broken Windows" Effect: An Experiment in Belgium, France and the Netherlands

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Author Info

  • Mathieu Lefebvre
  • Pierre Pestieau
  • Arno Riedl
  • Marie Claire Villeval

Abstract

In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others’ behavior. Subjects have to decide between a 'registered' income, the realization of which will be known to the tax authority for sure, and an 'unregistered' income that will only be known with some probability. This unregistered income comes from self-employment in the Tax treatment and from black labor supplementing some unemployment compensation in the Welfare treatment. Subjects have then to decide on whether reporting their income or not, knowing the risk of detection. The results show that (i) individuals evade more in the Welfare treatment than in the Tax treatment; (ii) many subjects choose an option that allows for tax evasion or welfare fraud but report their income honestly anyway; (iii) examples of low compliance tend to increase tax evasion while examples of high compliance exert no influence; (iv) tax evasion is morefrequent in France and the Netherlands; Walloons evade taxes less than the Flemish. There is no cross-country difference in welfare dodging.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3408.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3408

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Keywords: tax evasion; social fraud; social comparisons; cross-country comparisons; experiments;

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References

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Citations

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Cited by:
  1. Bénabou, Roland & Tirole, Jean, 2011. "Laws and Norms," CEPR Discussion Papers 8663, C.E.P.R. Discussion Papers.
  2. Cettolin Elena & Riedl Arno, 2011. "Partial coercion, conditional cooperation, and self-commitment in voluntary contributions to public goods," Research Memorandum 041, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Cécile Bazart & Aurélie Bonein, 2012. "Reciprocal Relationships in Tax Compliance Decisions," Working Papers 12-35, LAMETA, Universtiy of Montpellier, revised Dec 2012.

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