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Response Times and Tax Compliance

Author

Listed:
  • Ho Fai Chan

    () (School of Economics and Finance, Queensland University of Technology, Brisbane, QLD 4000, Australia
    Centre for Behavioural Economics, Society and Technology, Brisbane, QLD 4000, Australia)

  • Uwe Dulleck

    () (School of Economics and Finance, Queensland University of Technology, Brisbane, QLD 4000, Australia
    Centre for Behavioural Economics, Society and Technology, Brisbane, QLD 4000, Australia
    Crawford School of Public Policy, Australian National University, Canberra, ACT 4000, Australia)

  • Benno Torgler

    () (School of Economics and Finance, Queensland University of Technology, Brisbane, QLD 4000, Australia
    Centre for Behavioural Economics, Society and Technology, Brisbane, QLD 4000, Australia
    Center for Research in Economics, Management and the Arts, CH-8008 Zürich, Switzerland)

Abstract

Inspired by the work of Rubinstein, this study revisits data from a previous lab experiment to explore the relation between response times and tax compliance and understand the potential non-linearity between them by classifying decisions and individuals into compliance types. We find that individuals’ decision response time is related to their compliance decisions. Full-non compliant individuals (those who did not declare any earned income) have shorter response times than those who fully or partially complied. Full-compliant individuals also tend to declare income faster than partially compliant subjects. Such results are robust throughout time and when controlling for contextual characteristics of experimental design. We find non-linearity via an inverted U -shape function that reaches its maximum declaration time around a compliance rate of 60%, even after controlling for contextual experimental design factors. In addition, we observe a non-linear relation between cognitive skills, response time, and tax compliance. Participants with relatively high cognitive skills and very low or very high tax compliance level have low response times, while subjects with relatively lower cognitive skills tend to report higher decision times for higher compliance levels.

Suggested Citation

  • Ho Fai Chan & Uwe Dulleck & Benno Torgler, 2019. "Response Times and Tax Compliance," Games, MDPI, Open Access Journal, vol. 10(4), pages 1-13, November.
  • Handle: RePEc:gam:jgames:v:10:y:2019:i:4:p:45-:d:283250
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    References listed on IDEAS

    as
    1. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: A Study of Response Times," Economic Journal, Royal Economic Society, vol. 117(523), pages 1243-1259, October.
    2. Piovesan, Marco & Wengström, Erik, 2009. "Fast or fair? A study of response times," Economics Letters, Elsevier, vol. 105(2), pages 193-196, November.
    3. Dulleck, Uwe & Fooken, Jonas & Newton, Cameron & Ristl, Andrea & Schaffner, Markus & Torgler, Benno, 2016. "Tax compliance and psychic costs: Behavioral experimental evidence using a physiological marker," Journal of Public Economics, Elsevier, vol. 134(C), pages 9-18.
    4. Alm, James & Jackson, Betty & McKee, Michael, 1992. "Institutional Uncertainty and Taxpayer Compliance," American Economic Review, American Economic Association, vol. 82(4), pages 1018-1026, September.
    5. Jiang, Ting, 2013. "Cheating in mind games: The subtlety of rules matters," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 328-336.
    6. Torgler, Benno, 2002. "Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 16(5), pages 657-683, December.
    7. Alm, James & Jackson, Betty R. & McKee, Michael, 1993. "Fiscal exchange, collective decision institutions, and tax compliance," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 285-303, December.
    8. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: Response Times Study," Levine's Bibliography 321307000000001011, UCLA Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    response time; tax compliance; cognitive skill; income declaration; tax experiment;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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