Learning in experiments: Dynamic interaction of policy variables designed to deter tax evasion

Soliman, Amal; Jones, Philip; Cullis, John

doi:10.1016/j.joep.2013.05.012

Cited by 9 publications

(4 citation statements)

References 28 publications

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“…Subsequent research has found that classical enforcement measures do have a weakening impact on tax evasion, but it can be either considerably small (Andreoni, Erard, & Feinstein, 1998) or have a reverse effect on the willingness to pay taxes (Feld & Frey, 2002;Kirchler, Hoelzl, & Wahl, 2008). The impact of audits has been analysed under different settings: performing audits only if declared income falls below a certain threshold (known as triggered audits or audit cut-off policy) or using the bounded rule, where taxpayers are provided with knowledge on the maximum number of audits to be carried out (Alm, Cronshaw, & McKee, 1993;Tan & Yim, 2014). Moreover, the classical viewpoint, which states that fines dominate over control through monitoring (therefore setting them at the maximum levels should result in higher compliance) is, however, a wrong approach, one which fails to consider the existence of imperfections in the market, asymmetric information and intrinsic implications under which an optimal fine level exists below the maximum level (Lisi, 2015).…”

Section: Theoretical Review Of Tax Behaviour Determinantsmentioning

confidence: 99%

“…Tax evasion is not a one-shot decision; therefore, the study of dynamics (such as learning) in the model is essential for understanding the emergence or failure of different tax compliance aspects. A degree of dynamic interaction between audit and penalty rates can have an impact on tax behaviour, meaning that it is not any combination of these measurements that results in a divergence of an individual compliance level towards the one predicted by the neoclassical theory, as described through an adaptive learning model based on optimisation, in which successful decisions have a higher probability of being adopted (Soliman, Jones & Cullis, 2014). The concept of learning includes acknowledgement and expectation of the frequency of audits (so called the bomb-crater effect): an agent, being audited in a single period, believes he will not be audited in the next one (see e.g.…”

Section: Theoretical Review Of Tax Behaviour Determinantsmentioning

confidence: 99%

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Tax Behaviour: Assessment of Tax Compliance in European Union Countries

Pukelienė¹,

Kažemekaityte²

2016

ECO

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Section: Theoretical Review Of Tax Behaviour Determinantsmentioning

confidence: 99%

Section: Theoretical Review Of Tax Behaviour Determinantsmentioning

confidence: 99%

Tax Behaviour: Assessment of Tax Compliance in European Union Countries

Pukelienė¹,

Kažemekaityte²

2016

ECO

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“…The discussion of tax evasion detection techniques began with the incorporation of behavior analysis, pioneered by Allingham and Sandmo (1972), who studied reporting income of individual taxpayers under uncertainty. Exploration of psychology followed, such as the experiences of taxpayers with audit probability and penalty on evasion (Bruttel & Friehe 2014;Soliman, Jones & Cullis 2014;Tan & Yim 2014).…”

Section: Introductionmentioning

confidence: 99%

Behavioral Reaction to the 2008 Income Tax Reform in Indonesia: A Bunching Analysis

Putra

Bayer

2020

JIA

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Income tax reforms generally constitute some changes in marginal tax rates and its income thresholds which often lead to a higher tax liability. Taxpayers may respond to these changes differently, mainly by trying to lower their tax payments. Self-employed individuals have a greater incentive to strategically adjust to a lower income declaration. Using administrative tax data, this paper examines the reaction of self-employed taxpayers to the 2008 Indonesian Income Tax Reform using bunching analysis. Beside a clear evidence on bunching around the first kink point, our empirical findings suggest that Indonesia exhibits special cases. We find an inertia of pre-reform bunching around the first kink point in later years as well as an extraordinary bunching above the first kink point in the post-reform periods.

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“…Other papers study the dynamic effects of tax behavior. For instance, Soliman et al (2014) explore experimentally the dynamic interaction between audit and penalty rates as individuals learn how to comply with taxation. In our paper, we focus mostly on the effects of peers' actions and information on individual risk preference.…”

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confidence: 99%

The effects of official and unofficial information on tax compliance

Garcia

Opromolla

Vezzulli

et al. 2020

Journal of Economic Psychology

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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. AbstractThe administration of tax policy has shifted its focus from enforcement to complementary instruments aimed at creating a social norm of tax compliance. In this paper we provide an analysis of the effects of the dissemination of information regarding the past degree of tax evasion at the social level on the current individual tax compliance behavior. We build an experiment where, for given levels of audit probabilities, fines and tax rates, subjects have to declare their income after receiving either a communication of the official average tax evasion rate or a private message from a group of randomly matched peers about their tax behavior. We use the experimental data to estimate a dynamic econometric model of tax evasion. The econometric model extends the Allingham-Sandmo-Yitzhaki tax evasion model to include selfconsistency and endogenous social interactions among taxpayers. We find four main results. First, tax compliance is very persistent. Second, the higher the official past tax evasion rate the higher the degree of persistence: evaders are more likely to evade again, and compliant individuals are more likely to comply again. Third, when all peers communicate to have evaded (complied) in the past, both evaders and compliant individuals are more likely to evade (comply). Fourth, while both treatments, and especially the unofficial information treatment, are associated, in the context of our experiment, with a significantly larger growth in evasion intensity, the aggregate effect depends on the characteristics of the population. In countries with inherently low levels of tax evasion, official information can have beneficial effects by consolidating the behavior of compliant individuals. However, in countries with inherently high levels of tax evasion, official information can have detrimental effects by intensifying the behavior of evaders. In both cases, the impact of official information is magnified in the presence of strong peer effects. JEL-Codes: H260, D630, C240, C920, Z130.

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Learning in experiments: Dynamic interaction of policy variables designed to deter tax evasion

Cited by 9 publications

References 28 publications

Tax Behaviour: Assessment of Tax Compliance in European Union Countries

Tax Behaviour: Assessment of Tax Compliance in European Union Countries

Behavioral Reaction to the 2008 Income Tax Reform in Indonesia: A Bunching Analysis

The effects of official and unofficial information on tax compliance

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