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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

  • Lefèbvre, Mathieu

    ()
    (CREPP, Université de Liège)

  • Pestieau, Pierre

    ()
    (CREPP, Université de Liège)

  • Riedl, Arno

    ()
    (Maastricht University)

  • Villeval, Marie Claire

    ()
    (CNRS, GATE)

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 more frequent 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5609.

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Length: 51 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5609

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

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References

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Cited by:
  1. Roland Benabou & Jean Tirole, 2011. "Laws and Norms," NBER Working Papers 17579, National Bureau of Economic Research, Inc.
  2. Elena Cettolin & Arno Riedl, 2011. "Partial Coercion, Conditional Cooperation, and Self-Commitment in Voluntary Contributions to Public Goods," CESifo Working Paper Series 3556, CESifo Group Munich.
  3. Bazart, C. & Bonein, A., 2014. "Reciprocal relationships in tax compliance decisions," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 83-102.

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