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Prefilled Income Tax Returns and Tax Compliance: Evidence from a Natural Experiment

Author

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  • Kotakorpi Kaisa
  • Laamanen Jani-Petri

    (School of Management, University of Tampere)

Abstract

Despite the adoption of prefilled tax forms in many countries, little is known about their effects on taxpayers’ reporting behaviour. We estimate the effect of the income tax filing system on taxpayers’ reporting behaviour, utilising data from a Finnish policy experiment. We find that receiving a (partially) prefilled income tax return lead to a significant reduction in non-prefilled deductions and self-reported income, and an increase in deductions that were prefilled in the new system. However, we do not find effects on individuals’ total taxable income or taxes paid. We discuss complexity and compliance costs, salience effects, and changes in the opportunities for tax evasion as possible explanations for our findings.

Suggested Citation

  • Kotakorpi Kaisa & Laamanen Jani-Petri, 2016. "Prefilled Income Tax Returns and Tax Compliance: Evidence from a Natural Experiment," Working Papers 1604, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:1604
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    File URL: http://urn.fi/URN:ISBN:978-952-03-0150-7
    File Function: First version, 2016
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    References listed on IDEAS

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    Cited by:

    1. van Dijk, Wilco W. & Goslinga, Sjoerd & Terwel, Bart W. & van Dijk, Eric, 2020. "How choice architecture can promote and undermine tax compliance: Testing the effects of prepopulated tax returns and accuracy confirmation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    2. Glenn P. Jenkins & Siamand Hesami & Osaid Alshamleh & Anastasiya Yarygina & Carola Pessino, 2023. "A Cost-Benefit Analysis Methodology for Administrative Prefilling of Value-Added Tax Returns: An Application for Chile," Development Discussion Papers 2023-10, JDI Executive Programs.
    3. Tazhitdinova, Alisa, 2015. "Reducing Evasion Through Self-Reporting: Theory and Evidence from Charitable Contributions," MPRA Paper 81612, University Library of Munich, Germany, revised 2017.
    4. Miguel Almunia & Jarkko Harju & Kaisa Kotakorpi & Janne Tukiainen & Jouko Verho, 2019. "Expanding access to administrative data: the case of tax authorities in Finland and the UK," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(3), pages 661-676, June.
    5. Anne Brockmeyer & David Phillips, 2023. "Tax equity around the world: a discussion," Fiscal Studies, John Wiley & Sons, vol. 44(3), pages 237-241, September.
    6. Martin Fochmann & Frank Hechtner & Tobias Kölle & Michael Overesch, 2021. "Combating overreporting of deductions in tax returns: prefilling and restricting the deductibility of expenditures," Journal of Business Economics, Springer, vol. 91(7), pages 935-964, September.
    7. Antinyan, Armenak & Asatryan, Zareh, 2019. "Nudging for tax compliance: A meta-analysis," ZEW Discussion Papers 19-055, ZEW - Leibniz Centre for European Economic Research.
    8. William G. Morrison & Bradley J. Ruffle, 2020. "Insurable losses, pre-filled claims forms and honesty in reporting," Working Paper series 20-18, Rimini Centre for Economic Analysis.
    9. Kaisa Kotakorpi & Satu Metsälampi & Topi Miettinen & Tuomas Nurminen, 2019. "The effect of reporting institutions on tax evasion:Evidence from the lab," Discussion Papers 127, Aboa Centre for Economics.
    10. Engström, Per & Nordblom, Katarina & Stefánsson, Arnaldur, 2022. "Loss aversion and indifference to tax rates: Evidence from tax filing data," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 287-311.
    11. Fochmann, Martin & Müller, Nadja & Overesch, Michael, 2018. "Less cheating? The effects of prefilled forms on compliance behavior," arqus Discussion Papers in Quantitative Tax Research 227, arqus - Arbeitskreis Quantitative Steuerlehre.

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    More about this item

    Keywords

    income tax filing; complexity; salience; tax evasion; natural experiment;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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