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What Goes Around Comes Around? Experimental Evidence of the Effect of Rewards on Tax Compliance

  • Barbara Kastlunger

    ()

    (University of Vienna, Vienna, Austria)

  • Stephan Muehlbacher

    (University of Vienna, Vienna, Austria)

  • Erich Kirchler

    (University of Vienna, Vienna, Austria)

  • Luigi Mittone

    (CEEL-Computable and Experimental Economics Laboratory, University of Trento, Trento, Italy)

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    The current experimental study examined the effect of monetary rewards on tax compliance. Eighty-six participants were randomly assigned to one control and two reward conditions (low vs. high reward). Overall, tax compliance was not affected by the rewards. However, a change in compliance strategies was observed. It seems that rewards provoked an all-or-nothing behavior. Whereas in the reward conditions, participants were either completely honest or evaded all of their income, in the control condition, the amount of evasion varied more strongly. Furthermore, audited compliant taxpayers who are rewarded evaded less in the following period compared with audited compliant taxpayers who experienced no rewards.

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    File URL: http://pfr.sagepub.com/content/39/1/150.abstractFileFormat:text/html
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    Article provided by in its journal Public Finance Review.

    Volume (Year): 39 (2011)
    Issue (Month): 1 (January)
    Pages: 150-167

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    Handle: RePEc:sae:pubfin:v:39:y:2011:i:1:p:150-167
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