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Behavioral dynamics of tax compliance under an information services initiative

Author

Listed:
  • McKee, Michael
  • Siladke, Caleb
  • Vossler, Christian A.

Abstract

Tax authorities utilize the audit process, imposing penalties on tax evaders, as their primary means of enforcement. In recent years, a “service” paradigm, whereby tax authorities provide information about correct tax reporting to taxpayers, has shown the potential to further “encourage” correct tax reporting. This research utilizes laboratory experiments to investigate the behavioral dynamics pertaining to information acquisition and tax evasion. The results show that the overall effect of a helpful information service is to decrease tax evasion. Further, an audit has the behavioral effect of lowering information acquisition rates and increasing evasion immediately after experiencing a penalty. This effect persists (although diminishes) in subsequent tax reporting decisions.

Suggested Citation

  • McKee, Michael & Siladke, Caleb & Vossler, Christian A., 2011. "Behavioral dynamics of tax compliance under an information services initiative," MPRA Paper 38865, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38865
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    File URL: https://mpra.ub.uni-muenchen.de/38865/1/MPRA_paper_38865.pdf
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    References listed on IDEAS

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    1. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    2. Lars P. Feld & Bruno S. Frey, 2002. "Trust breeds trust: How taxpayers are treated," Economics of Governance, Springer, vol. 3(2), pages 87-99, July.
    3. 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.
    4. Mittone, Luigi, 2006. "Dynamic behaviour in tax evasion: An experimental approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(5), pages 813-835, October.
    5. Ben Greiner, 2004. "The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics," Working Paper Series in Economics 10, University of Cologne, Department of Economics.
    6. James Alm & Kim M. Bloomquist & Michael McKee, 2015. "On The External Validity Of Laboratory Tax Compliance Experiments," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1170-1186, April.
    7. Maciejovsky, Boris & Kirchler, Erich & Schwarzenberger, Herbert, 2007. "Misperception of chance and loss repair: On the dynamics of tax compliance," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 678-691, December.
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    Citations

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    Cited by:

    1. De Neve, Jan-Emmanuel & Lamberton, Cait & Norton, Michael I., 2014. "Eliciting taxpayer preferences increases tax compliance," LSE Research Online Documents on Economics 60277, London School of Economics and Political Science, LSE Library.
    2. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.
    3. Jan-Emmanuel De Neve & Cait Lamberton & Michael I. Norton, 2014. "Eliciting Taxpayer Preferences Increases Tax Compliance," CEP Discussion Papers dp1270, Centre for Economic Performance, LSE.

    More about this item

    Keywords

    Tax evasion; Tax compliance; Behavioral Dynamics; Behavioral economics; Experimental economics;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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