Tax compliance and enforcement in the pampas evidence from a field experiment

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. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws.Copyright © Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. Cataloging-in-Publication AbstractTax evasion is a pervasive problem in many countries. In particular, some developing countries do not collect even half of what they would if taxpayers complied with the written letter of the law. The academic literature has not been oblivious to the need to explain why people pay (or do not pay) taxes. However, the empirical literature has not yet reached consensus. This paper reports the results of a large field experiment that tried to affect compliance by influencing property tax taxpayers' beliefs regarding the levels of enforcement, equity, and fairness of the tax system in a municipality in Argentina. Results indicate that the most effective message was one that stated the actual fines and potential legal consequences taxpayers may face in the case of noncompliance (tax compliance increased by more than 4 percentage points). No average effects are found for the treatments designed to affect beliefs about the equity and fairness of the system. However, the evidence also points out that not every taxpayer updates his or her beliefs in the same direction, as relevant heterogeneous effects are found across the population. The evidence in this paper advances the state of knowledge and may help to reconcile some of the different results in the literature. JEL classifications: H26, C93, D03, H41

One Size Does Not Fit All: A Field Experiment on the Drivers of Tax Compliance and Delivery Methods in Rwanda

“…The complete text of emails, letters and text messages is reported in Appendix 1. 16 The picture of the gavel used for the deterrence message was also used in Castro and Scartascini (2015). 17 The main body of the SMS was limited to 140 characters and the name of the taxpayer was limited to 15 characters.…”

“…In those cases, it may even be counterproductive to emphasise deterrence, because it may reinforce distrust and taxpayer resistance (see for example Fjeldstad and Semboja (2001)), as well as further undermining the credibility of the revenue administration. On the other hand, existing evidence on factors related to tax morale is more mixed, as some studies find that they matter for compliance (Hallsworth, List, Metcalfe and Vlaev 2014;Bott et al 2014), while others fail to find an effect (Dwenger et al 2015;Blumenthal, Christian and Slemrod 2001;Castro and Scartascini 2015;Fellner et al 2013). The impact of tax morale also seems to be highly dependent on what specific aspect is highlighted in any given study, as well as prior motivations and beliefs on compliance (see for example Dwenger et al 2015;Del Carpio 2014;Ali, Fjeldstad, and Sjursen 2015).…”

“…4 For a more detailed discussion of tax morale and its components, see Luttmer and Singhal (2014). 8 Castro and Scartascini 2015;Fellner, Sausgruber, and Traxler 2013;Ariel 2012;Bott, Cappelen and Sørensen 2014;Dwenger, Kleven, Raul and Rincke 2015). However, they also highlighted its limitations in low enforcement environments (Carrillo, Pomeranz and Singhal 2016), where 'threats of audit' cannot be followed up with actual checks by the revenue authority.…”

Tax Behaviour: Assessment of Tax Compliance in European Union Countries

“…The observed levels of tax compliance tend to be not as low as proposed by the classical model (Andreoni, Erard, & Feinstein, 1998;Castro & Scartascini, 2015) and slippery slope framework (SSF) addresses these differences. Under SSF, compliance can be induced either through enforcing (coercive) measures, which depend on authority power (namely, audits and fines) or through voluntary (persuasive) measures, which depend on trust in authorities (emerging from the provision of services and support for taxpayers).…”

“…An economic research on the subject of tax compliance and tax evasion began with the seminal study by Allingham & Sandmo (1972), followed by Srinivasan (1973) and Yitzhaki (1974). This classical approach, labelled by some researchers as "economics of crime", puts the taxpayer in a gambler's position, having to choose between compliance and evasion -in other words, between legal and criminal activities (Alm, Cherry, Jones, & McKee, 2010;Christian & Alm, 2014;Casagrande, Cagno, Pandimiglio, & Spallone, 2015;Castro & Scartascini, 2015). The traditional approach suggests two compliance enforcement measures: randomised audits (with pre-committed probabilities) and penalties (fines, levied on the undeclared income) with an additional effect from income levels.…”