Intrinsic and Extrinsic Effects on Behavioral Tax Biases in Risky Investment Decisions

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn a variety of recent papers, it is shown that individuals do not take taxes correctly into account, which results in distorted or unexpected investment behavior. We shed further light on the discussion of such behavioral tax perception biases by analyzing intrinsic and extrinsic effects on decision behavior. We study two dimensions: (1) the influence of emotions and cognition (individual dimension, intrinsic effects) and (2) the influence of available tax information by varying tax complexity and salience (tax system dimension, extrinsic effects).In our laboratory experiment, we construct the payoff structure such that the subjects are confronted with exactly the same choices in net terms in a situation with or without a capital gains tax. This design allows us to identify pure tax perception biases. We show that both dimensions are able to explain tax perception biases. In particular, we find evidence that perceived risk (cognition) is lower and consequently willingness to take risk is higher with a capital gains tax (with full loss offset provision) than without taxation. Furthermore, this positive effect on risky investment is higher in a situation with a rather low level of tax information in which tax complexity is high and tax salience is low. In addition, we are able to provide evidence that the use of decision heuristics can explain the observed tax bias differences between our information treatments. In particular, we find a negative relationship between the information level and the use of heuristics.

Tax policy measures to combat the SARS-CoV-2 pandemic and considerations to improve tax compliance: A behavioral perspective

“…Finally, behavioral tax research has demonstrated the importance of emotions in investment responses to tax incentives. Fochmann, Hemmerich, and Kiesewetter (2016) show that the more pleasant and less exciting a tax treatment 9 is perceived to be, the greater is the risky investment. Fochmann, Hewig, Kiesewetter, and Schüßler (2017) also provide evidence that investors do not change their risk-taking behavior as a direct consequence of changing tax rules, yet they do react in response to the affective perception of these different tax rules.…”

Tax Policy Measures to Combat the SARS-CoV-2 Pandemic and Considerations to Improve Tax Compliance: A Behavioral Perspective

“…Finally, behavioral tax research has demonstrated the importance of emotions in investment responses to tax incentives. Fochmann, Hemmerich, and Kiesewetter (2016) show that the more pleasant and less exciting a tax treatment 9 is perceived to be, the greater is the risky investment. Fochmann, Hewig, Kiesewetter, and Schüßler (2017) also provide evidence that investors do not change their risk-taking behavior as a direct consequence of changing tax…”