The effects of rewards on tax compliance 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 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.

A Conceptual Model of Sales Tax Compliance among Jordanian SMEs and Its Implications for Future Research

“…This study refers to tax fairness as the distribution of sales tax registration threshold and sales tax penalties in a fair manner by the tax authority, with fair cost falling on the registered sales tax. A positive relationship was established between tax fairness and tax compliance behavior by some prior studies (e.g., Fochmann & Kroll, 2015;McKerchar, Bloomquist, & Pope, 2013;Kirchler & Wahl, 2010;Feld & Frey, 2007), others reported no relationship (e.g., Benk, Ç akmak & Budak, 2011), while some others like Sinnasamy, Bidin and Syed-Ismail (2015) reported mixed results. In the sales tax context, literature also showed a positive tax fairness-sales tax compliance association (Woodward & Tan, 2015;Adams & Webley, 2001).…”

Delayed feedback, regulatory fit and goal framing effects on tax compliance: An exploratory study

“…Some studies have confirmed the positive impact of the pertinent information and messageframing on tax compliance (Fochmann & Kroll, 2016;Gangl et al, 2016;Hofmann et al, 2008;Sussman & Olivola, 2011). Moreover, it has also been found that more significant effect can be reached if the message is correctly directed according to taxpayers´ promotion and prevention focus (Holler et al, 2008).…”

A Socio-Economic Model of Sales Tax Compliance

“…In the present work, tax fairness is defined as the distribution of sales tax registration threshold and sales tax penalties in all fairness by the tax authority entity, with fair cost manifested in registered sales tax. For this construct, Fochmann and Kroll (2015), McKerchar et al (2013), Kirchler and Wah (2010) and Feld and Frey (2007) reported a positive tax fairness-tax compliance behavior relationship, Benk et al (2011) reported the lack of a significant relationship, whereas Saymeh and Sabha (2015) reported a combination of findings. However, in the sales tax context, Woodward and Tan (2015) and Adams and Webley (2001) supported a positive relationship between the two variables.…”