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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 - UQAM - Université du Québec à Montréal)

  • David Masclet

    (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal , CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - CNRS - Centre National de la Recherche Scientifique)

  • Claude Montmarquette

    (CIRANO - Centre Interuniversitaire de Recherche en ANalyse des Organisations)

Abstract

Tax 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 tax 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 Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00601691
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    References listed on IDEAS

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    1. C. Cadsby & Elizabeth Maynes & Viswanath Trivedi, 2006. "Tax compliance and obedience to authority at home and in the lab: A new experimental approach," Experimental Economics, Springer;Economic Science Association, vol. 9(4), pages 343-359, December.
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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. Telle, Kjetil, 2013. "Monitoring and enforcement of environmental regulations," Journal of Public Economics, Elsevier, vol. 99(C), pages 24-34.
    3. 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(03), pages 354-379, June.
    4. Imes, Amanda J. Thoe, 2013. "An examination of the sales and use tax gap based on Minnesota audit experience," Master's Theses 157013, University of Minnesota, Department of Applied Economics.

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