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Honesty or Dishonesty of Taxpayer Communications in an Enforcement Regime

Author

Listed:
  • James Alm

    () (Department of Economics, Tulane University)

  • David M. Bruner

    () (Department of Economics, Appalachian State University)

  • Michael McKee

    () (Department of Economics, Appalachian State University)

Abstract

In many settings the true likelihood of capture when engaging in an illegal activity, such as tax evasion, is not well known to an individual. "Official" statements from the tax administration regarding enforcement effort provide some information. In addition, "informal", or "unofficial", communication among taxpayers can supplement these official announcements, but individuals do not know with certainty whether such unofficial information is honest (or accurate) versus dishonest (or inaccurate). We examine the truthfulness of an individual's revelation of unofficial information to other individuals, along with the factors that affect any revelation, focusing on the intrinsic motivations for revelations. Our experimental design allows us to examine the type and the honesty of messages that an individual chooses to send to other individuals regarding their own audit outcome and their own compliance behavior. Our results indicate that most individuals send accurate messages about their own audit outcomes and their own compliance behaviors. Nevertheless, many individuals are also systematically dishonest about being audited; that is, we observe a significant tendency for individuals to claim that they were audited when they were not. We also observe a strong interaction between individuals' audit outcomes and their compliance behaviors, so that individuals who engaged in tax evasion and who were audited were more truthful in their communications than those whose tax evasion went undetected.

Suggested Citation

  • James Alm & David M. Bruner & Michael McKee, 2016. "Honesty or Dishonesty of Taxpayer Communications in an Enforcement Regime," Working Papers 1620, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1620
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    References listed on IDEAS

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    Cited by:

    1. Alm, James, 2018. "Is Economics Useful for Public Policy?," Working Paper Series 6824, Victoria University of Wellington, Chair in Public Finance.
    2. James Alm, 2017. "Is Economics Useful for Public Policy?," Working Papers 1702, Tulane University, Department of Economics.

    More about this item

    Keywords

    Tax compliance; Tax audits; Information; Honesty; Experimental economics.;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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