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Behavioral dynamics of tax compliance when taxpayer assistance services are available

Author

Listed:
  • Michael McKee

    (Appalachian State University)

  • Caleb A. Siladke

    (University of Tennessee)

  • Christian A. Vossler

    () (University of Tennessee)

Abstract

Abstract This research utilizes a laboratory experiment involving a large and diverse set of participants to investigate the behavioral dynamics of tax reporting in a setting where tax liability is uncertain and the tax agency makes a service available to help resolve the uncertainty. Our design varies the level of liability uncertainty, as well as the cost and quality of the information service. We find that, in the absence of an information service regime, the behavioral response to past audits, whether penalizing or not, is to report a lower tax liability. However, with an information service present (regardless of whether it is accessed), behavioral responses to past audits are no longer found. Interestingly, information service acquisition decreases modestly in response to a penalizing audit, although as the experiment progressed a larger proportion of participants were compliant, offsetting this effect. Mirroring the few experimental studies that have investigated tax liability information services, we find that providing these services has a strong and positive effect on tax compliance.

Suggested Citation

  • Michael McKee & Caleb A. Siladke & Christian A. Vossler, 2018. "Behavioral dynamics of tax compliance when taxpayer assistance services are available," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(3), pages 722-756, June.
  • Handle: RePEc:kap:itaxpf:v:25:y:2018:i:3:d:10.1007_s10797-017-9466-z
    DOI: 10.1007/s10797-017-9466-z
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Tax evasion; Tax compliance; Behavioral dynamics; Behavioral economics; Experimental economics;

    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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