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The effects of income source, context, and income level on tax compliance decisions in a dynamic experiment

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  • Durham, Yvonne
  • Manly, Tracy S.
  • Ritsema, Christina

Abstract

This study employs a laboratory experiment to explore the joint effect of income source (earned versus endowed) and decision context (tax versus nontax) on tax compliance behavior. During the experiment, subjects faced various income levels and made multiple reporting decisions. The results indicate that overall compliance is not significantly affected by the interaction of income source and context. However, this joint effect influences the relationship between income level and compliance and how compliance behavior evolves over time. In both cases, the treatment group with earned income in a tax context displays behavior that is distinct from the other three groups.

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  • Durham, Yvonne & Manly, Tracy S. & Ritsema, Christina, 2014. "The effects of income source, context, and income level on tax compliance decisions in a dynamic experiment," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 220-233.
    • Handle: RePEc:eee:joepsy:v:40:y:2014:i:c:p:220-233
    DOI: 10.1016/j.joep.2012.09.012
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    3. 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).
    4. Christoph Kogler & Stephan Muehlbacher & Erich Kirchler, 2015. "Testing the “slippery slope framework” among self-employed taxpayers," Economics of Governance, Springer, vol. 16(2), pages 125-142, May.
    5. Tugay Gunel & Irem Didinmez, 2022. "Relationship between rule of law and tax revenues: dynamic panel data analysis," Public Sector Economics, Institute of Public Finance, vol. 46(3), pages 403-419.
    6. Kogler, Christoph & Olsen, Jerome & Bogaers, Rebecca I., 2020. "Enhanced anonymity in tax experiments does not affect compliance," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 390-398.
    7. Lubomir Cingl & Tomas Lichard & Tomas Miklanek, 2022. "Mist Over a Meadow: Tax Designation Effects on Compliance," CERGE-EI Working Papers wp725, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    8. Alison Macintyre & Ho Fai Chan & Markus Schaffner & Benno Torgler, 2021. "National Pride and Tax Compliance: A Laboratory Experiment Using a Physiological Marker," CREMA Working Paper Series 2021-07, Center for Research in Economics, Management and the Arts (CREMA).
    9. Sandro Casal & Veronika Grimm & Simeon Schächtele, 2019. "Taxation with Mobile High-Income Agents: Experimental Evidence on Tax Compliance and Equity Perceptions," Games, MDPI, vol. 10(4), pages 1-29, October.
    10. Blaufus, Kay & Braune, Matthias & Hundsdoerfer, Jochen & Jacob, Martin, 2015. "Does legality matter? The case of tax avoidance and evasion," arqus Discussion Papers in Quantitative Tax Research 193, arqus - Arbeitskreis Quantitative Steuerlehre.
    11. Luca Vota, 2022. "Efficient monitoring of tax avoidance: a Costly State Verification model," SN Business & Economics, Springer, vol. 2(12), pages 1-11, December.
    12. Blaufus, Kay & Braune, Matthias & Hundsdoerfer, Jochen & Jacob, Martin, 2015. "Does legality matter? The case of tax avoidance and evasion," Discussion Papers 2015/23, Free University Berlin, School of Business & Economics.
    13. 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.
    14. Colin C. Williams & Friedrich Schneider, 2016. "Measuring the Global Shadow Economy," Books, Edward Elgar Publishing, number 16551.
    15. Dezső, Linda & Alm, James & Kirchler, Erich, 2022. "Inequitable wages and tax evasion," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    16. Mawani, Amin & Trivedi, Viswanath Umashanker, 2021. "Collusive vs. coercively corrupt tax auditors and their impact on tax compliance," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
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    18. Blaufus, Kay & Hundsdoerfer, Jochen & Jacob, Martin & Sünwoldt, Matthias, 2016. "Does legality matter? The case of tax avoidance and evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 127(C), pages 182-206.
    19. Grundmann, Susanna, 2020. "Do just deserts and competition shape patterns of cheating?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-79-20, University of Passau, Faculty of Business and Economics.

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    More about this item

    Keywords

    Tax compliance; Income source; Context; Income level; Experiments;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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