Tax avoidance among large multinational corporations has considerably increased in recent years, triggering an intense discussion about how to ensure that all pay their ‘fair share’. We propose a novel experimental design to incentive-compatibly model the firm-consumer relationship in a consumer goods market. This new paradigm allows us to analyze the effect of increased tax transparency on consumer and firm behavior in a dynamic framework. We find that absent the threat of being directly exposed as a tax avoiding firm, only 26% of the firms decide to pay taxes. Once tax avoiding firms are identifiable in the market, this rate rises to 58%. Providing market participants addi- tionally with information about the social costs of tax avoidance increases the fraction of tax paying firms further to 74%. We observe that these improvements are the conse- quence of firms proactively deciding to pay taxes. At the highest level of transparency, we further observe that consumers show a stronger proclivity to boycott tax avoiding firms, even if these firms offer cheaper prices
Author
Abstract
Suggested Citation
Download full text from publisher
References listed on IDEAS
- Antonetti, Paolo & Anesa, Mattia, 2017. "Consumer reactions to corporate tax strategies: The role of political ideology," Journal of Business Research, Elsevier, vol. 74(C), pages 1-10.
- James Alm & Antoine Malézieux, 2021.
"40 years of tax evasion games: a meta-analysis,"
Experimental Economics, Springer;Economic Science Association, vol. 24(3), pages 699-750, September.
- James Alm & Antoine Malézieux, 2020. "40 Years of Tax Evasion Games: A Meta-Analysis," Working Papers 2004, Tulane University, Department of Economics.
- Bock, Olaf & Baetge, Ingmar & Nicklisch, Andreas, 2014. "hroot: Hamburg Registration and Organization Online Tool," European Economic Review, Elsevier, vol. 71(C), pages 117-120.
Most related items
These are the items that most often cite the same works as this one and are cited by the same works as this one.- Razen, Michael & Kupfer, Alexander, 2023. "The effect of tax transparency on consumer and firm behavior: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).
- Miloš Fišar & Tommaso Reggiani & Fabio Sabatini & Jiří Špalek, 2020.
"Media Bias and Tax Compliance: Experimental Evidence,"
MUNI ECON Working Papers
2020-01, Masaryk University, revised Feb 2023.
- Fišar, Miloš & Reggiani, Tommaso G. & Sabatini, Fabio & Špalek, Jiří, 2020. "Media Bias and Tax Compliance: Experimental Evidence," IZA Discussion Papers 12938, Institute of Labor Economics (IZA).
- Miloš Fišar & Tommaso Reggiani & Fabio Sabatini & Jiří Špalek, 2022.
"Media negativity bias and tax compliance: experimental evidence,"
International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1160-1212, October.
- Fisar, Milos & Reggiani, Tommaso & Sabatini, Fabio & Spalek, Jir, 2021. "Media negativity bias and tax compliance: Experimental evidence," Cardiff Economics Working Papers E2021/26, Cardiff University, Cardiff Business School, Economics Section.
- Milos Fisar & Tommaso Reggiani & Fabio Sabatini & Jiri Spalek, 2021. "Media negativity bias and tax compliance: Experimental evidence," Working Papers in Public Economics 211, University of Rome La Sapienza, Department of Economics and Law.
- Alice Guerra & Brooke Harrington, 2023. "Regional variation in tax compliance and the role of culture," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 139-152, April.
- David Dann & Raphael Müller & Ann-Catherin Werner & Timm Teubner & Alexander Mädche & Christoph Spengel, 2022. "How do tax compliance labels impact sharing platform consumers? An empirical study on the interplay of trust, moral, and intention to book," Information Systems and e-Business Management, Springer, vol. 20(3), pages 409-439, September.
- Lechthaler, Wolfgang & Ring, Patrick, 2021.
"Labor force participation, job search effort and unemployment insurance in the laboratory,"
Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 748-778.
- Lechthaler, Wolfgang & Ring, Patrick, 2020. "Labor force participation, job search effort and unemployment insurance in the laboratory," Kiel Working Papers 2149, Kiel Institute for the World Economy (IfW Kiel).
- Katharina Momsen & Markus Ohndorf, 2019. "When do people exploit moral wiggle room? An experimental analysis in a market setup," Working Papers 2019-03, Faculty of Economics and Statistics, Universität Innsbruck.
- Andrea Isoni & Robert Sugden & Jiwei Zheng, 2018. "The Pizza Night Game: Efficiency, Conflict and Inequality in Tacit Bargaining Games with Focal Points," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 18-01, School of Economics, University of East Anglia, Norwich, UK..
- Faralla, Valeria & Borà, Guido & Innocenti, Alessandro & Novarese, Marco, 2020.
"Promises in group decision making,"
Research in Economics, Elsevier, vol. 74(1), pages 1-11.
- Valeria Faralla & Guido Borà & Alessandro Innocenti & Marco Novarese, 2018. "Promises in Group Decision Making," Labsi Experimental Economics Laboratory University of Siena 051, University of Siena.
- Celse, Jeremy & Karakostas, Alexandros & Zizzo, Daniel John, 2023.
"Relative risk taking and social curiosity,"
Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 243-264.
- Jeremy Celse & Alexandros Karakostas & Daniel John Zizzo, 2021. "Relative Risk Taking and Social Curiosity," Discussion Papers Series 648, School of Economics, University of Queensland, Australia.
- Quement, Mark T. Le & Marcin, Isabel, 2020. "Communication and voting in heterogeneous committees: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 449-468.
- Tim Krieger & Christine Meemann & Stefan Traub, 2022.
"Inequality, Life Expectancy, and the Intragenerational Redistribution Puzzle - Some Experimental Evidence,"
CESifo Working Paper Series
9677, CESifo.
- Krieger, Tim & Meemann, Christine & Traub, Stefan, 2022. "Inequality, life expectancy, and the intragenerational redistribution puzzle: Some experimental evidence," Discussion Paper Series 2022-02, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
- Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022.
"Honesty in the Digital Age,"
Management Science, INFORMS, vol. 68(2), pages 827-845, February.
- Michel André Maréchal & Alain Cohn & Tobias Gesche, 2018. "Honesty in the Digital Age," CESifo Working Paper Series 6996, CESifo.
- Michel André Maréchal & Alain Cohn & Tobias Gesche, 2018. "Honesty in the digital age," ECON - Working Papers 280, Department of Economics - University of Zurich, revised Dec 2020.
- Shaul Shalvi & Ivan Soraperra & Joël van der Weele & Marie Claire Villeval, 2019. "Shooting the Messenger? Supply and Demand in Markets for Willful Ignorance," Tinbergen Institute Discussion Papers 19-071/I, Tinbergen Institute.
- Rémi Suchon & Marie Claire Villeval, 2017.
"Does upward mobility harm trust?,"
Post-Print
halshs-01659021, HAL.
- Rémi Suchon & Marie Claire Villeval, 2017. "Does upward mobility harm trust?," Post-Print halshs-01659034, HAL.
- Rémi Suchon & Marie Claire Villeval, 2018. "Does upward mobility harm trust?," Working Papers 1801, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
- Rémi Suchon & Marie Claire Villeval, 2017. "Does upward mobility harm trust?," Post-Print halshs-01659038, HAL.
- Rémi Suchon & Marie Claire Villeval, 2018. "Does upward mobility harm trust?," Working Papers halshs-01687271, HAL.
- Anna Louisa Merkel & Johannes Lohse, 2019.
"Is fairness intuitive? An experiment accounting for subjective utility differences under time pressure,"
Experimental Economics, Springer;Economic Science Association, vol. 22(1), pages 24-50, March.
- Merkel, Anna & Lohse, Johannes, 2018. "Is fairness intuitive? An experiment accounting for subjective utility differences under time pressure," Working Papers 0647, University of Heidelberg, Department of Economics.
- Björn Bartling & Vanessa Valero & Roberto A. Weber, 2018.
"Is Social Responsibility a Normal Good?,"
CESifo Working Paper Series
7263, CESifo.
- Björn Bartling & Vanessa Valero & Roberto A. Weber, 2018. "Is social responsibility a normal good?," ECON - Working Papers 299, Department of Economics - University of Zurich.
- Leonie Kühl & Nora Szech, 2017.
"Physical Distance and Cooperativeness Towards Strangers,"
CESifo Working Paper Series
6825, CESifo.
- Leonie Kühl & Nora Szech, 2017. "Physical Distance and Cooperativeness Towards Strangers," Working Papers 2017-087, Human Capital and Economic Opportunity Working Group.
- Kühl, Leonie & Szech, Nora, 2017. "Physical distance and cooperativeness towards strangers," Working Paper Series in Economics 110, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
- Balafoutas, Loukas & Sutter, Matthias, 2019.
"How uncertainty and ambiguity in tournaments affect gender differences in competitive behavior,"
European Economic Review, Elsevier, vol. 118(C), pages 1-13.
- Loukas Balafoutas & Brent J. Davis & Matthias Sutter, 2017. "How uncertainty and ambiguity in tournaments affect gender differences in competitive behavior," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_18, Max Planck Institute for Research on Collective Goods.
- Loukas Balafoutas & Matthias Sutter, 2019. "How uncertainty and ambiguity in tournaments affect gender differences in competitive behavior," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2019_09, Max Planck Institute for Research on Collective Goods.
- Balafoutas, Loukas & Sutter, Matthias, 2019. "How Uncertainty and Ambiguity in Tournaments Affect Gender Differences in Competitive Behavior," IZA Discussion Papers 12348, Institute of Labor Economics (IZA).
- Loukas Balafoutas & Matthias Sutter, 2017. "How uncertainty and ambiguity in tournaments affect gender differences in competitive behavior," Working Papers 2017-20, Faculty of Economics and Statistics, Universität Innsbruck.
- James Alm, 2024. "Tax Compliance, Technology, Trust, and Inequality in a Post-Pandemic World," Working Papers 2404, Tulane University, Department of Economics.
More about this item
Keywords
economic experiment; tax avoidance; public good dilemma; consumer behavior; firm behavior;All these keywords.
JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
NEP fields
This paper has been announced in the following NEP Reports:- NEP-EXP-2021-04-05 (Experimental Economics)
- NEP-PBE-2021-04-05 (Public Economics)
Statistics
Access and download statisticsCorrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inn:wpaper:2021-10. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Janette Walde (email available below). General contact details of provider: https://edirc.repec.org/data/fuibkat.html .
Please note that corrections may take a couple of weeks to filter through the various RePEc services.