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Fighting Income Tax Evasion with Positive Rewards: Experimental Evidence

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Author Info
Cécile Bazart
Michael Pickhardt
Abstract

This paper provides experimental evidence regarding the influence of positive rewards on income tax evasion behavior. In particular, we experimentally test the impact of positive rewards in form of individual lottery winnings for honest taxpayers. Among other things, we find that these positive rewards lead to a significantly higher rate of tax compliance. Moreover, there are two gender effects. Males not only evade taxes to a much higher extent than females, they also show a stronger positive response to the lottery scheme. This allows us to draw some interesting policy recommendations.

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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 09-01.

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Length: 32 pages
Date of creation: Jan 2009
Date of revision: Jun 2009
Handle: RePEc:lam:wpaper:09-01

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  1. Edward Christie & Mario Holzner, 2006. "What Explains Tax Evasion? An Empirical Assessment based on European Data," Working Papers 40, The Vienna Institute for International Economic Studies, wiiw. [Downloadable!]
  2. Robin Boadway & Motohiro Sato, 2000. "The Optimality of Punishing Only the Innocent: The Case of Tax Evasion," International Tax and Public Finance, Springer, vol. 7(6), pages 641-664, December. [Downloadable!] (restricted)
  3. James Andreoni & Lise Vesterlund, 2001. "Which Is The Fair Sex? Gender Differences In Altruism," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 293-312, February. [Downloadable!] (restricted)
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  4. Torgler, Benno, 2002. " Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments," Journal of Economic Surveys, Blackwell Publishing, vol. 16(5), pages 657-83, December. [Downloadable!] (restricted)
  5. Fershtman, Chaim & Weiss, Yoram, 1998. "Social rewards, externalities and stable preferences," Journal of Public Economics, Elsevier, vol. 70(1), pages 53-73, October. [Downloadable!] (restricted)
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  6. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
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  7. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier. [Downloadable!] (restricted)
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  8. Becker, Winfried & Buchner, Heinz-Jurgen & Sleeking, Simon, 1987. "The impact of public transfer expenditures on tax evasion : An experimental approach," Journal of Public Economics, Elsevier, vol. 34(2), pages 243-252, November. [Downloadable!] (restricted)
  9. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
  10. Lars P. Feld & Bruno S. Frey, 2002. "Trust breeds trust: How taxpayers are treated," Economics of Governance, Springer, vol. 3(2), pages 87-99, 07. [Downloadable!] (restricted)
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  11. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
  12. Slemrod, Joel & Blumenthal, Marsha & Christian, Charles, 2001. "Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota," Journal of Public Economics, Elsevier, vol. 79(3), pages 455-483, March. [Downloadable!] (restricted)
  13. Michael Pickhardt & Jordi Sardà Pons, 2006. "Size and scope of the underground economy in Germany," Applied Economics, Taylor and Francis Journals, vol. 38(14), pages 1707-1713, August. [Downloadable!] (restricted)
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  15. Cornes, Richard, 1993. "Dyke Maintenance and Other Stories: Some Neglected Types of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 259-71, February. [Downloadable!] (restricted)
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  17. Chander, Parkash & Wilde, Louis L, 1998. "A General Characterization of Optimal Income Tax Enforcement," Review of Economic Studies, Blackwell Publishing, vol. 65(1), pages 165-83, January. [Downloadable!] (restricted)
  18. Michael Pickhardt, 2005. "Some remarks on self-interest, the historical schools and the evolution of the theory of public goods," Journal of Economic Studies, Emerald Group Publishing, vol. 32(3), pages 275-293, September. [Downloadable!] (restricted)
  19. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June. [Downloadable!] (restricted)
  20. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May. [Downloadable!] (restricted)
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