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Tax Evasion, Welfare Fraud, and "The Broken Windows" Effect: An Experiment in Belgium, France and the Netherlands

Author

Listed:
  • Mathieu Lefebvre

    (CREPP - Center of Research in Public Economics and Population Economics - Université de Liège)

  • Pierre Pestieau

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, CEPR - Center for Economic Policy Research, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Arno Riedl

    (The Maastricht University School of Business and Economics - Maastricht University [Maastricht])

  • Marie Claire Villeval

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others' behavior. Subjects have to decide between a "registered" income, the realization of which will be known to the tax authority for sure, and an "unregistered" income that will only be known with some probability. This unregistered income comes from self-employment in the Tax treatment and from black labor supplementing some unemployment compensation in the Welfare treatment. Subjects have then to decide on wether reporting their income or not, knowing the risk od detection. The results show that (i) individuals evade more in the Welfare treatment than in the Tax treatment ; (ii) many subjects choose and option that allows for tax evasion or welfare fraud but report their income honestly anyway ; (iii) examples of low compliance tend to increase tax evasion while examples of high compliance exert no influence ; (iv) tax evasion is more frequent in France and the Netherlands ; Wallons evade taxes less than Flemish. There is no cross-country difference in welfare dodging.

Suggested Citation

  • Mathieu Lefebvre & Pierre Pestieau & Arno Riedl & Marie Claire Villeval, 2011. "Tax Evasion, Welfare Fraud, and "The Broken Windows" Effect: An Experiment in Belgium, France and the Netherlands," Working Papers halshs-00948296, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00948296
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    Cited by:

    1. Roland Benabou & Jean Tirole, 2011. "Laws and Norms," NBER Working Papers 17579, National Bureau of Economic Research, Inc.
    2. James Alm & Kim M. Bloomquist & Michael McKee, 2017. "When You Know Your Neighbour Pays Taxes: Information, Peer Effects and Tax Compliance," Fiscal Studies, Institute for Fiscal Studies, vol. 38, pages 587-613, December.
    3. Bazart, C. & Bonein, A., 2014. "Reciprocal relationships in tax compliance decisions," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 83-102.
    4. Elena Cettolin & Arno Riedl, 2011. "Partial Coercion, Conditional Cooperation, and Self-Commitment in Voluntary Contributions to Public Goods," CESifo Working Paper Series 3556, CESifo.
    5. Jahnke, Bjoern, 2015. "Tax morale and reciprocity. A case study from Vietnam," Hannover Economic Papers (HEP) dp-563, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    6. Mathieu Lefebvre & Pierre Pestieau & Arno Riedl & Marie Claire Villeval, 2013. "Les attitudes sont-elles différentes face à la fraude fiscale et à la fraude sociale ?," Post-Print halshs-00724736, HAL.
    7. Erzo F. P. Luttmer & Monica Singhal, 2014. "Tax Morale," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 149-168, Fall.
    8. Muhammad Muazzam Mughal, 2012. "Reasons of Tax Avoidance and Tax Evasion: Reflections from Pakistan," Journal of Economics and Behavioral Studies, AMH International, vol. 4(4), pages 217-222.
    9. Tan, Fangfang & Yim, Andrew, 2014. "Can strategic uncertainty help deter tax evasion? An experiment on auditing rules," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 161-174.
    10. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
    11. Coricelli, Giorgio & Rusconi, Elena & Villeval, Marie Claire, 2014. "Tax evasion and emotions: An empirical test of re-integrative shaming theory," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 49-61.

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    More about this item

    Keywords

    tax evasion; social fraud; social comparisons; cross-country comparisons; experiments;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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