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Taxpayer Information Assistance Services and Tax Compliance Behavior

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Author Info

  • James Alm

    () (Department of Economics, Tulane University)

  • Todd Cherry

    () (Department of Economics, Walker College of Business, Appalachian State University)

  • Michael Jones

    () (Department of Economics, Bridgewater State College)

  • Michael McKee

    () (Department of Economics, Walker College of Business, Appalachian State University)

Abstract

The traditional "enforcement" paradigm of tax administration views taxpayers as potential criminals, and emphasizes the repression of illegal behavior through frequent audits and stiff penalties. However, an important trend in tax administration policies in recent years is the recognition that this paradigm is incomplete. Instead, a revised "service" paradigm recognizes the role of enforcement, but also emphasizes the role of tax administration as a facilitator and a provider of services to taxpayer-citizens. This research utilizes laboratory experiments to test the effectiveness of such taxpayer service programs in enhancing tax compliance. Our basic experimental setting mimics the naturally occurring environment: subjects earn income, they must choose whether to file a tax return, and they then must choose how much of their net income to report to a tax authority that may audit the subject. To investigate the effects of taxpayer services, we "complicate" these compliance decisions of subjects, and then provide "services" from the "tax administration" that allow subjects to compute more easily their tax liabilities. Our results indicate that uncertainty reduces both the filing and the reporting compliance of an individual. However, we also find that agency-provided information has a positive and significant impact on the tendency of an individual to file a tax return, and also on reporting for individuals who choose to file a return.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1101.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1101.

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Length: 27 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:tul:wpaper:1101

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Keywords: tax evasion; tax compliance; behavioral economics; experimental economics;

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References

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  1. Joel Slemrod & Marsha Blumenthal & Charles Christian, 2001. "Taxpayer response to an increased probability of audit: Evidence from a controlled experiment in minnesota," Natural Field Experiments 00332, The Field Experiments Website.
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Citations

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Cited by:
  1. Kai A. Konrad & Tim Lohse & Salmai Qari, 2011. "Customs Compliance and the Power of Imagination," Working Papers customs_compliance_and_th, Max Planck Institute for Tax Law and Public Finance.
  2. James Alm, 2012. "Measuring, Explaining, and Controlling Tax Evasion: Lessons from Theory, Experiments, and Field Studies," Working Papers 1213, Tulane University, Department of Economics.
  3. Stefura Gabriela, 2012. "The Role of Opportunity, Taxpayers’ Perceptions and Demographic Differences in Tax Compliance Analysis," Annals - Economic and Administrative Series -, Faculty of Business and Administration, University of Bucharest, vol. 6(1), pages 163-177, December.
  4. Djawadi, Behnud Mir & Fahr, René, 2013. "The Impact of Tax Knowledge and Budget Spending Influence on Tax Compliance," IZA Discussion Papers 7255, Institute for the Study of Labor (IZA).
  5. James Alm & Jeremy Clark & Kara Leibel, 2011. "Socio-economic Diversity, Social Capital, and Tax Filing Compliance in the United States," Working Papers in Economics 11/35, University of Canterbury, Department of Economics and Finance.
  6. Sebastian Eichfelder & Chantal Kegels, 2012. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Schumpeter Discussion Papers sdp12005, Universitätsbibliothek Wuppertal, University Library.
  7. James, Simon & Edwards, Alison, 2010. "An annotated bibliography of tax compliance and tax compliance costs," MPRA Paper 26106, University Library of Munich, Germany.

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