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The effect of perfect monitoring of matched income on sales tax compliance: An experimental investigation

Author

Listed:
  • Cathleen Johnson

    (CIRANO - Centre interuniversitaire de recherche en analyse des organisations [Montréal, Canada] = Center for Interuniversity Research and Analysis on Organizations [Montréal, Canada])

  • David Masclet

    (CIRANO - Centre interuniversitaire de recherche en analyse des organisations [Montréal, Canada] = Center for Interuniversity Research and Analysis on Organizations [Montréal, Canada], CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Claude Montmarquette

    (CIRANO - Centre interuniversitaire de recherche en analyse des organisations [Montréal, Canada] = Center for Interuniversity Research and Analysis on Organizations [Montréal, Canada])

Abstract

Tar noncompliance is a quantitatively important phenomenon that significantly affects government revenues. and thus raises challenging questions about the determinants of tax reporting and the appropriate design of a tax system. This paper provides empirical insights regarding the nature of tar noncompliance, using an experimental approach to evaluate the effects of systematic sales tax monitoring and identify the determinants of sales tax compliance The results suggest that if perfect monitoring of a single revenue source is introduced without other complementary policies, an increase in tax revenues is not the likely, outcome as evasion increases for other revenue sources That is, the data suggest that once taxpayers have chosen their level of tax compliance, they, will try to recover their losses following any policy changes, even if it implies assuming more risks.

Suggested Citation

  • Cathleen Johnson & David Masclet & Claude Montmarquette, 2010. "The effect of perfect monitoring of matched income on sales tax compliance: An experimental investigation," Post-Print halshs-00601691, HAL.
    • Handle: RePEc:hal:journl:halshs-00601691
    DOI: 10.17310/ntj.2010.1.05
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    Cited by:

    1. Kjetil Telle, 2012. "Monitoring and enforcement of environmental regulations. Lessons from a natural field experiment in Norway," Discussion Papers 680, Statistics Norway, Research Department.
    2. Rustam Romaniuc & Dimitri Dubois & Eugen Dimant & Adrian Lupusor & Valeriu Prohnitchi, 2022. "Understanding cross-cultural differences in peer reporting practices: evidence from tax evasion games in Moldova and France," Public Choice, Springer, vol. 190(1), pages 127-147, January.
    3. Ahmad Farhan Alshira’h & Hijattulah Abdul-Jabbar & Rose Shamsiah Samsudin, 2019. "The Effect of Tax Moral on Sales Tax Compliance among Jordanian SMEs," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(1), pages 30-41, January.
    4. Gonzalez, Fidel & Leipnik, Mark & Mazumder, Diya, 2013. "How much are urban residents in Mexico willing to pay for cleaner air?," Environment and Development Economics, Cambridge University Press, vol. 18(3), pages 354-379, June.
    5. Imes, Amanda J. Thoe, 2013. "An examination of the sales and use tax gap based on Minnesota audit experience," Master's Theses and Plan B Papers 157013, University of Minnesota, Department of Applied Economics.
    6. Telle, Kjetil, 2013. "Monitoring and enforcement of environmental regulations," Journal of Public Economics, Elsevier, vol. 99(C), pages 24-34.
    7. Masclet, David & Montmarquette, Claude & Viennot-Briot, Nathalie, 2019. "Can whistleblower programs reduce tax evasion? Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 83(C).

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