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The role of information in tax compliance: Evidence from a natural field experiment

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  • Tuomas Kosonen
  • Olli Ropponen

Abstract

It is challenging to distinguish the role of information in tax compliance from other factors affecting it. This paper utilizes a novel natural field experiment design to study the issue. In the experiment firms reporting their VAT were sent a letter asking them questions about their attitude towards the tax authority. The introductions to the questions provided candid information about VAT rules for a randomized treatment group, while a randomized control group was only asked questions without additional information. We observe the effects of the treatments directly from firm-level tax records. Providing information did reduce the noncompliance in tax reporting, which indicates that there were unintentional errors. The experimental design also allows us to study whether the difficulty and novelty of the tax code plays any role in tax compliance. The results indicate that tax reporting changes when new and easy information is provided.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 48.

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Date of creation: 16 Sep 2013
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Handle: RePEc:fer:wpaper:48

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Keywords: tax compliance; information; field experiment;

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  1. Jonah E. Rockoff & Douglas O. Staiger & Thomas J. Kane & Eric S. Taylor, 2012. "Information and Employee Evaluation: Evidence from a Randomized Intervention in Public Schools," American Economic Review, American Economic Association, American Economic Association, vol. 102(7), pages 3184-3213, December.
  2. Raj Chetty & Emmanuel Saez, 2009. "Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients," NBER Working Papers 14836, National Bureau of Economic Research, Inc.
  3. Amy Finkelstein, 2009. "E-ZTAX: Tax Salience and Tax Rates," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(3), pages 969-1010, August.
  4. Esther Duflo & Emmanuel Saez, 2003. "The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(3), pages 815-842, August.
  5. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 99(4), pages 1145-77, September.
  6. Erard, Brian, 1997. "Self-selection with measurement errors A microeconometric analysis of the decision to seek tax assistance and its implications for tax compliance," Journal of Econometrics, Elsevier, Elsevier, vol. 81(2), pages 319-356, December.
  7. Abeler, Johannes & Jäger, Simon, 2013. "Complex Tax Incentives: An Experimental Investigation," IZA Discussion Papers 7373, Institute for the Study of Labor (IZA).
  8. Robert Jensen, 2010. "The (Perceived) Returns to Education and the Demand for Schooling," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(2), pages 515-548, May.
  9. Justine S. Hastings & Jeffrey M. Weinstein, 2007. "Information, School Choice, and Academic Achievement: Evidence from Two Experiments," NBER Working Papers 13623, National Bureau of Economic Research, Inc.
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