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Tax Evasion: Cheating Rationally or Deciding Emotionally?

  • Giorgio Coricelli

    (ISC - Institut des Sciences Cognitives - CNRS - UCBL - Université Claude Bernard Lyon 1)

  • Mateus Joffily

    (ISC - Institut des Sciences Cognitives - CNRS - UCBL - Université Claude Bernard Lyon 1)

  • Claude Montmarquette

    (Université de Montréal - Département de Sciences Economique - Université de Montréal)

  • Marie Claire Villeval


    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines)

The economic models of tax compliance predict that individuals should evade taxes when the expected benefit of cheating is greater than its expected cost. When this condition is fulfilled, the high compliance however observed remains a puzzle. In this paper, we investigate the role of emotions as a possible explanation of tax compliance. Our laboratory experiment shows that emotional arousal, measured by Skin Conductance Responses, increases in the proportion of evaded taxes. The perspective of punishment after an audit, especially when the pictures of the evaders are publicly displayed, also raises emotions. We show that an audit policy that induces shame on the evaders favors compliance.

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Paper provided by HAL in its series Post-Print with number hal-00196332.

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Date of creation: 2007
Date of revision:
Publication status: Published in Working paper GATE 2007-24. 2007
Handle: RePEc:hal:journl:hal-00196332
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  1. Benno Torgler, 2004. "Moral suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland," Economics of Governance, Springer, vol. 5(3), pages 235-253, November.
  2. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
  3. Bayer, Ralph-C & Sutter, Matthias, 2009. "The excess burden of tax evasion--An experimental detection-concealment contest," European Economic Review, Elsevier, vol. 53(5), pages 527-543, July.
  4. Ronald G. Cummings & Jorge Martinez-Vazquez & Michael McKee & Benno Torgler, 2007. "Effects of Tax Morale on Tax Compliance: Experimental and Survey Evidence," NCER Working Paper Series 12, National Centre for Econometric Research.
  5. Fortin, Bernard & Lacroix, Guy & Villeval, Marie Claire, 2004. "Tax Evasion and Social Interactions," IZA Discussion Papers 1359, Institute for the Study of Labor (IZA).
  6. 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.
  7. Charness, Gary & Gneezy, Uri, 2003. "Portfolio Choice and Risk Attitudes: An Experiment," University of California at Santa Barbara, Economics Working Paper Series qt7vz7w609, Department of Economics, UC Santa Barbara.
  8. Alm, James & Cronshaw, Mark B & McKee, Michael, 1993. "Tax Compliance with Endogenous Audit Selection Rules," Kyklos, Wiley Blackwell, vol. 46(1), pages 27-45.
  9. Myles, Gareth D. & Naylor, Robin A., 1996. "A model of tax evasion with group conformity and social customs," European Journal of Political Economy, Elsevier, vol. 12(1), pages 49-66, April.
  10. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
  11. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
  12. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610, Wisconsin Madison - Social Systems.
  13. Wenzel, Michael, 2004. "An analysis of norm processes in tax compliance," Journal of Economic Psychology, Elsevier, vol. 25(2), pages 213-228, April.
  14. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, June.
  15. Blumenthal, Marsha & Christian, Charles W. & Slemrod, Joel, 2001. "Do Normative Appeals Affect Tax Compliance? Evidence from a Controlled Experiment in Minnesota," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 125-38, March.
  16. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: A Study of Response Times," Economic Journal, Royal Economic Society, vol. 117(523), pages 1243-1259, October.
  17. repec:oup:qjecon:v:106:y:1991:i:4:p:1039-61 is not listed on IDEAS
  18. Bosco, Luigi & Mittone, Luigi, 1997. "Tax Evasion and Moral Constraints: Some Experimental Evidence," Kyklos, Wiley Blackwell, vol. 50(3), pages 297-324.
  19. 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 657-83, December.
  20. Spicer, Michael W. & Thomas, J. Everett, 1982. "Audit probabilities and the tax evasion decision: An experimental approach," Journal of Economic Psychology, Elsevier, vol. 2(3), pages 241-245, September.
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