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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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  • Lefebvre Mathieu
  • Pestieau Pierre
  • Riedl Arno
  • Villeval Marie Claire

    (METEOR)

Abstract

In a series of experiments conducted in Belgium (Wallonia and Flanders), France and theNetherlands, 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 Taxtreatment; (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 Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 023.

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Date of creation: 2011
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Handle: RePEc:unm:umamet:2011023

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Keywords: public economics ;

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Cited by:
  1. Benabou, Roland & Tirole, Jean, 2012. "Laws and Norms," IZA Discussion Papers 6290, Institute for the Study of Labor (IZA).
  2. Cécile Bazart & Aurélie Bonein, 2012. "Reciprocal Relationships in Tax Compliance Decisions," Working Papers, LAMETA, Universtiy of Montpellier 12-35, LAMETA, Universtiy of Montpellier, revised Dec 2012.
  3. Cettolin Elena & Riedl Arno, 2011. "Partial coercion, conditional cooperation, and self-commitment in voluntary contributions to public goods," Research Memorandum, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) 041, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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