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Heard it through the grapevine: The direct and network effects of a tax enforcement field experiment on firms

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  • Boning, William C.
  • Guyton, John
  • Hodge, Ronald
  • Slemrod, Joel

Abstract

Tax enforcement may have deterrent effects that extend beyond directly treated taxpayers, but evidence of such deterrent effects for major sources of revenue is limited. This paper studies the effects of a large-scale field experiment on employer deposits that make up most U.S. tax collections. In-person visits by Revenue Officers have a large direct effect on visited firms' tax deposits. The other clients of visited firms' tax preparers also deposit more tax, a network effect that suggests preparers disseminate information. Aggregating over all links, this network effect accounts for 1.2 times as much revenue as the direct effect. Letters conveying the same message are found to have much smaller direct effects and no measurable network effects.

Suggested Citation

  • Boning, William C. & Guyton, John & Hodge, Ronald & Slemrod, Joel, 2020. "Heard it through the grapevine: The direct and network effects of a tax enforcement field experiment on firms," Journal of Public Economics, Elsevier, vol. 190(C).
    • Handle: RePEc:eee:pubeco:v:190:y:2020:i:c:s0047272720301250
    DOI: 10.1016/j.jpubeco.2020.104261
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    References listed on IDEAS

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    Cited by:

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    2. Dario Tortarolo & Guillermo Cruces & Gonzalo Vazquez-Bare, 2023. "Design of partial population experiments with an application to spillovers in tax compliance," IFS Working Papers W23/17, Institute for Fiscal Studies.
    3. Bellon, Matthieu & Dabla-Norris, Era & Khalid, Salma, 2023. "Technology and tax compliance spillovers: Evidence from a VAT e-invoicing reform in Peru," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 756-777.
    4. John A. List & Fatemeh Momeni & Yves Zenou, 2020. "The Social Side of Early Human Capital Formation: Using a Field Experiment to Estimate the Causal Impact of Neighborhoods," Working Papers 2020-187, Becker Friedman Institute for Research In Economics.
    5. Guillermo Cruces & Dario Tortarolo & Gonzalo Vazquez-Bare, 2022. "Design of two-stage experiments with an application to spillovers in tax compliance," IFS Working Papers W22/32, Institute for Fiscal Studies.
    6. Juan F. Castro & Daniel Velásquez & Arlette Beltrán & Gustavo Yamada, 2020. "Spillovers and Long Run Effects of Messages on Tax Compliance: Experimental Evidence from Peru," Working Papers 174, Peruvian Economic Association.
    7. Liang, Quanxi & Li, Qiumei & Lu, Meiting & Shan, Yaowen, 2021. "Industry and geographic peer effects on corporate tax avoidance: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    8. Castro, Juan Francisco & Velásquez, Daniel & Beltrán, Arlette & Yamada, Gustavo, 2022. "The direct and indirect effects of messages on tax compliance: Experimental evidence from Peru," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 483-518.
    9. Debora Di Gioacchino & Domenico Fichera, 2022. "Tax evasion and social reputation: The role of influencers in a social network," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1048-1069, November.
    10. Bjørneby, Marie & Alstadsæter, Annette & Telle, Kjetil, 2021. "Limits to third-party reporting: Evidence from a randomized field experiment in Norway," Journal of Public Economics, Elsevier, vol. 203(C).
    11. Saulitis, Andris & Chapkovski, Philipp, 2023. "Investigating Tax Compliance with Mixed-Methods Approach: The Effect of Normative Appeals Among the Firms in Latvia," MPRA Paper 116560, University Library of Munich, Germany.
    12. Philippe Aghion & Ufuk Akcigit & Maxime Gravoueille & Matthieu Lequien & Stefanie Stantcheva, 2023. "Tax simplicity or simplicity of evasion? Evidence from self-employment taxes in France," POID Working Papers 050, Centre for Economic Performance, LSE.
    13. Kasper, Matthias & Rablen, Matthew D., 2023. "Tax compliance after an audit: Higher or lower?," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 157-171.

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    More about this item

    Keywords

    Tax enforcement; Randomized experiments; Networks;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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