Comparing Direct and Indirect Taxation: The Influence of Framing on Tax Compliance
Standard theory of the optimal mix of direct and indirect taxation implicitly assumes that compliance is not influenced by the framing of the taxes. According to our findings, this is not the case. Using an experimental approach, we examine whether framing the tax payment decision as income tax or consumption tax influences compliance. We find that median compliance is 10.2 percentage points higher in the income tax framing. Further, we find that subjects' reaction to a change in tax rates is comparable, but reaction towards a change in detection rates is higher in the consumption tax scheme. We conclude that behavioral patterns should be taken into account when drawing conclusions about the direct-indirect tax mix
Volume (Year): 5 (2008)
Issue (Month): 1 (June)
|Contact details of provider:|| Postal: Corso Matteotti 22 - Castellanza (VA) 21053|
Phone: +39 (0)331-572 1
Fax: +39 (0)331-572 320
Web page: http://eaces.liuc.it/default.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cremer, Helmuth & Gahvari, Firouz, 1993. "Tax evasion and optimal commodity taxation," Journal of Public Economics, Elsevier, vol. 50(2), pages 261-275, February.
- Krishna, Aradhna & Slemrod, Joel, 2003. "Behavioral Public Finance: Tax Design As Price Presentation," International Tax and Public Finance, Springer, vol. 10(2), pages 189-203, March.
- Rabin, Matthew, 1993.
"Incorporating Fairness into Game Theory and Economics,"
American Economic Review,
American Economic Association, vol. 83(5), pages 1281-1302, December.
- M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
- Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
- Wolfram F. Richter & Robin W. Boadway, 2005.
"Trading Off Tax Distortion and Tax Evasion,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 7(3), pages 361-381, 08.
- Slemrod, Joel, 1990.
"Optimal Taxation and Optimal Tax Systems,"
Journal of Economic Perspectives,
American Economic Association, vol. 4(1), pages 157-78, Winter.
- Bruno S. Frey & Benno Torgler, 2006.
"Tax Morale and Conditional Cooperation,"
CREMA Working Paper Series
2006-11, Center for Research in Economics, Management and the Arts (CREMA).
- Frey, Bruno S. & Torgler, Benno, 2006. "Tax Morale and Conditional Cooperation," Berkeley Olin Program in Law & Economics, Working Paper Series qt3rd3f982, Berkeley Olin Program in Law & Economics.
- Bruno S. Frey & Benno Torgler, 2006. "Tax Morale and Conditional Cooperation," IEW - Working Papers 286, Institute for Empirical Research in Economics - University of Zurich.
- Lerner, Abba P, 1970. "On Optimal Taxes With an Untaxable Sector," American Economic Review, American Economic Association, vol. 60(3), pages 284-94, June.
- Gordon, James P. P., 1989. "Individual morality and reputation costs as deterrents to tax evasion," European Economic Review, Elsevier, vol. 33(4), pages 797-805, April.
- A. B. Atkinson & N. H. Stern, 1980.
"On the switch from direct to indirect taxation,"
in: Econometric Studies in Public Finance, pages 195-224
National Bureau of Economic Research, Inc.
- James Andreoni & Brian Erard & Jonathan Feinstein, 1998.
Journal of Economic Literature,
American Economic Association, vol. 36(2), pages 818-860, June.
- Forest, Adam & Sheffrin, Steven M., 2002. "Complexity and Compliance: An Empirical Investigation," National Tax Journal, National Tax Association, vol. 55(N. 1), pages 75-88, March.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Dixit, Avinash K, 1970. "On the Optimum Structure of Commodity Taxes," American Economic Review, American Economic Association, vol. 60(3), pages 295-301, June.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001.
"Are people conditionally cooperative? Evidence from a public goods experiment,"
Elsevier, vol. 71(3), pages 397-404, June.
- Urs Fischbacher & Simon Gaechter & Ernst Fehr, . "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
- McLaren, John, 1998. "Black Markets and Optimal Evadable Taxation," Economic Journal, Royal Economic Society, vol. 108(448), pages 665-79, May.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-79, May.
- James R. Hines, 2004. "Might Fundamental Tax Reform Increase Criminal Activity?," Economica, London School of Economics and Political Science, vol. 71(283), pages 483-492, 08.
- Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54.
- Werner Güth & Rupert Sausgruber, 2004.
"Tax Morale and Optimal Taxation,"
CESifo Working Paper Series
1284, CESifo Group Munich.
- Emmanuel Saez, 2002.
"Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run,"
NBER Working Papers
8833, National Bureau of Economic Research, Inc.
- Saez, Emmanuel, 2004. "Direct or indirect tax instruments for redistribution: short-run versus long-run," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 503-518, March.
- Plott, Charles R., . "Dimensions of Parallelism: Some Policy Applications of Experimental Methods," Working Papers 569, California Institute of Technology, Division of the Humanities and Social Sciences.
- Alm, James & Jackson, Betty & McKee, Michael J., 1992. "Estimating the Determinants of Taxpayer Compliance with Experimental Data," National Tax Journal, National Tax Association, vol. 45(1), pages 107-14, March.
When requesting a correction, please mention this item's handle: RePEc:liu:liucej:v:5:y:2008:i:1:p:23-56. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Piero Cavaleri)
If references are entirely missing, you can add them using this form.