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Can Whistleblower Programs Reduce Tax Evasion? Experimental Evidence

Author

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  • David Masclet

    (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France and CIRANO)

  • Claude Montmarquette

    (Centre interuniversitaire de recherche en analyse des organisations (CIRANO), Montréal, Québec (Canada))

  • Nathalie Viennot-Briot

    (Centre interuniversitaire de recherche en analyse des organisations (CIRANO), Montréal, Québec (Canada))

Abstract

There are many ways of tackling tax evasion. The traditional strategies implemented by tax authorities fight fiscal fraud through audit and penalties. However, there also exist a plethora of unconventional methods, such as whistleblower programs. Although there is a rich economic literature on tax evasion, auditing and penalties, tax agencies’ heavy reliance on whistleblower programs has mostly been ignored. We ran an experiment in which taxpayers can punish tax evaders by reporting them to the authorities, even though it is costly for them to do so and despite the lack of any material benefit from doing so. Information on other taxpayers' compliance rates together with the opportunity to report tax evaders has a positive and a very significant effect on the level of income reported. Observing the compliance rates of other participants alone does not suffice to increase tax revenues, while the mere threat of being reported significantly increases revenues.

Suggested Citation

  • David Masclet & Claude Montmarquette & Nathalie Viennot-Briot, 2018. "Can Whistleblower Programs Reduce Tax Evasion? Experimental Evidence," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2018-11, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:2018-11
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    More about this item

    Keywords

    fiscal fraud; whistleblowers; ambiguous risk; laboratory experiment;
    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
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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