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Taxpayer Information Assistance Services and Tax Compliance Behavior

  • James Alm

    ()

    (Department of Economics, Tulane University)

  • Todd Cherry

    ()

    (Department of Economics, Walker College of Business, Appalachian State University)

  • Michael Jones

    ()

    (Department of Economics, Bridgewater State College)

  • Michael McKee

    ()

    (Department of Economics, Walker College of Business, Appalachian State University)

The traditional "enforcement" paradigm of tax administration views taxpayers as potential criminals, and emphasizes the repression of illegal behavior through frequent audits and stiff penalties. However, an important trend in tax administration policies in recent years is the recognition that this paradigm is incomplete. Instead, a revised "service" paradigm recognizes the role of enforcement, but also emphasizes the role of tax administration as a facilitator and a provider of services to taxpayer-citizens. This research utilizes laboratory experiments to test the effectiveness of such taxpayer service programs in enhancing tax compliance. Our basic experimental setting mimics the naturally occurring environment: subjects earn income, they must choose whether to file a tax return, and they then must choose how much of their net income to report to a tax authority that may audit the subject. To investigate the effects of taxpayer services, we "complicate" these compliance decisions of subjects, and then provide "services" from the "tax administration" that allow subjects to compute more easily their tax liabilities. Our results indicate that uncertainty reduces both the filing and the reporting compliance of an individual. However, we also find that agency-provided information has a positive and significant impact on the tendency of an individual to file a tax return, and also on reporting for individuals who choose to file a return.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1101.pdf
File Function: First version, 2011
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Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1101.

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Length: 27 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:tul:wpaper:1101
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  1. Erard, Brian & Ho, Chih-Chin, 2001. "Searching for ghosts: who are the nonfilers and how much tax do they owe?," Journal of Public Economics, Elsevier, vol. 81(1), pages 25-50, July.
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  8. James Alm & Benno Torgler, 2012. "Do Ethics Matter? Tax Compliance and Morality," Working Papers 1207, Tulane University, Department of Economics.
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  14. Cummings, Ronald G. & Martinez-Vazquez, Jorge & McKee, Michael & Torgler, Benno, 2009. "Tax morale affects tax compliance: Evidence from surveys and an artefactual field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 447-457, June.
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  20. Kirchler, Erich & Hoelzl, Erik & Wahl, Ingrid, 2008. "Enforced versus voluntary tax compliance: The "slippery slope" framework," Journal of Economic Psychology, Elsevier, vol. 29(2), pages 210-225, April.
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  24. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
  25. Alm, James, 1988. "Uncertain Tax Policies, Individual Behavior, and Welfare," American Economic Review, American Economic Association, vol. 78(1), pages 237-45, March.
  26. Kate Krause, 2000. "Tax Complexity: Problem or Opportunity?," Public Finance Review, , vol. 28(5), pages 395-414, September.
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