Sequences of audits, tax compliance, and taxpaying strategies

Kastlunger, Barbara; Kirchler, Erich; Mittone, Luigi; Pitters, Julia

doi:10.1016/j.joep.2008.10.004

Cited by 140 publications

(119 citation statements)

References 27 publications

(39 reference statements)

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“…The influence of the game specific and individual specific variables does not differ systematically to the effects observed in table 6. This result is in line with the "bomb crater effect" first observed by Mittone (2006) and further analyzed by, for example, Maciejovsky et al (2007) and Kastlunger et al (2009) which describes the tendency of subjects to decrease their tax compliance rates immediately after they were audited.…”

supporting

confidence: 84%

The effects of rewards on tax compliance decisions

Fochmann

Kroll²

2016

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. Terms of use: Documents in AbstractWe analyze how the redistribution of tax revenues influences tax compliance behavior by applying different reward mechanisms. In our experiment, subjects have to make two decisions. In the first stage, subjects decide on the contribution to a public good. In the second stage, subjects declare their income from the first stage for taxation. Our main results are threefold: First, from an aggregated perspective, rewards have a negative overall effect on tax compliance. Second, we observe that rewards affect the decision of taxpayers asymmetrically. In particular, rewards have either no effect (for those who are rewarded) or a negative effect (for those who are not rewarded) on tax compliance. Thus, if a high compliance rate of taxpayers is preferred, rewards should not be used by the tax authority. Third, we find an inverse u-shaped relationship between public good contribution and tax compliance. In particular, up to a certain level, tax compliance increases with subjects' own contributions to the public good. Above this level, however, tax compliance decreases with the public good contribution.

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supporting

confidence: 84%

The effects of rewards on tax compliance decisions

Fochmann

Kroll²

2016

Journal of Economic Psychology

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“…An absolute sanction mechanism holds the level of requested contribution constant whereas in our case when the contributions of others fall, the threshold of how much an individual should contribute drops sharply. This difference in the expected cost of sanction could also explain that we find a larger magnitude of differences across treatments compared to Kastlunger et al (2009) who also manipulate the frequency of audits.…”

Section: Discussionmentioning

confidence: 74%

“…Instead, we maintain ambiguity about audits but manipulate their sequence and vary their probability to investigate how compliance is affected by experiencing regular vs. irregular audits before audits are withdrawn. 7 Our approach is closer to that of Kastlunger et al (2009). They compare compliance in a tax game when the audit pattern is continuous at the beginning of the game and intermittent afterwards, and when the audit pattern occurs every second round.…”

Section: Related Literaturementioning

confidence: 99%

Ambiguity on audits and cooperation in a public goods game

Dai

Hogarth

Villeval

2015

European Economic Review

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Abstract:We investigate the impact of various audit schemes on the provision of public goods, when contributing less than the average of the other group members is centrally sanctioned and the probability of an audit is unknown. We study how individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn. We find that when individuals have initially experienced systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn. In contrast, when audits were initially less frequent and more irregular, they maintain high beliefs and continue cooperating long after audits have been withdrawn. This identifies the compliance effect of irregularity and uncertainty due to learning difficulties. By increasing both the frequency of audits and the severity of sanctions, we also identify an educative effect of frequent and high sanctions on further cooperation.

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“…The alternative is the bomb-crater e¤ect that is documented experimentally by Guala and Mittone (2005), Kastlunger et al (2009), Maciejovsky et al (2007, and Mittone (2006). In this process a taxpayer who has been audited in one period believes that they are less likely to be audited in the next, but the belief gradually rises over time.…”

Section: Network Modelmentioning

confidence: 99%

Predictive analytics and the targeting of audits

Hashimzade

Myles

Rablen

2016

Journal of Economic Behavior & Organization

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The literature on audit strategies has focused on random audits or on audits conditioned only on income declaration. In contrast, tax authorities employ the tools of predictive analytics to identify taxpayers for audit, with a range of variables used for conditioning. The paper explores the compliance and revenue consequences of the use of predictive analytics in an agent-based model that draws upon a behavioral approach to tax compliance. The taxpayers in the model form subjective beliefs about the probability of audit from social interaction, and are guided by a social custom that is developed from meeting other taxpayers. The belief and social custom feed into the occupational choice between employment and two forms of self-employment. It is shown that the use of predictive analytics yields a signi…cant increase in revenue over a random audit strategy.

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Sequences of audits, tax compliance, and taxpaying strategies

Cited by 140 publications

References 27 publications

The effects of rewards on tax compliance decisions

The effects of rewards on tax compliance decisions

Ambiguity on audits and cooperation in a public goods game

Predictive analytics and the targeting of audits

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