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Happy taxation: increasing tax compliance through positive rewards?

Author

Listed:
  • Brockmann, Hilke
  • Genschel, Philipp
  • Seelkopf, Laura

Abstract

Can governments increase tax compliance by rewarding honest taxpayers? We conducted a controlled laboratory experiment comparing tax compliance under a “deterrence” baseline with tax compliance under two “reward” treatments: a “donation” treatment giving taxpayers a say in the spending purposes of their payments and a “lucky” treatment giving taxpayers the (highly unlikely) chance of winning a lottery. The reward treatments significantly affected tax behaviour but not in a straightforward manner. Although female participants altered their behaviour as expected and complied somewhat more, men strongly reacted in the opposite manner: they evaded a much higher percentage of taxes than under the baseline. Apparently, there is no one-size-fits-all approach to boost tax compliance.

Suggested Citation

  • Brockmann, Hilke & Genschel, Philipp & Seelkopf, Laura, 2016. "Happy taxation: increasing tax compliance through positive rewards?," Journal of Public Policy, Cambridge University Press, vol. 36(3), pages 381-406, September.
    • Handle: RePEc:cup:jnlpup:v:36:y:2016:i:03:p:381-406_00
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    Cited by:

    1. Gaetano Lisi, 2022. "On the effectiveness of reward-based policies: Are we using the proper concept of tax reward?," Economics and Business Letters, Oviedo University Press, vol. 11(1), pages 41-45.
    2. Jacquemet, Nicolas & Luchini, Stéphane & Malézieux, Antoine, 2021. "Does voting on tax fund destination imply a direct democracy effect?," International Review of Law and Economics, Elsevier, vol. 67(C).
    3. Gaetano Lisi, 2023. "Tax evasion, tax reward and the optimal fiscal policy," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2023(3), pages 309-327.
    4. Carvalho, Carlos & Masini, Ricardo & Medeiros, Marcelo C., 2018. "ArCo: An artificial counterfactual approach for high-dimensional panel time-series data," Journal of Econometrics, Elsevier, vol. 207(2), pages 352-380.
    5. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.
    6. Alexander Libman & Janis N. Kluge, 2017. "Sticks or Carrots? Comparing Effectiveness of Government Shadow Economy Policies in Russia," Working Papers 364, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    7. Koessler, Ann-Kathrin & Torgler, Benno & Feld, Lars P. & Frey, Bruno S., 2019. "Commitment to pay taxes: Results from field and laboratory experiments," European Economic Review, Elsevier, vol. 115(C), pages 78-98.
    8. Oluwafadekemi S. Areo & Obindah Gershon & Evans Osabuohien, 2020. "Improved Public Services and Tax Compliance of Small and Medium Scale Enterprises in Nigeria: A Generalised Ordered Logistic Regression," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 833-860, July.
    9. Janis N. Kluge & Alexander Libman, 2018. "Sticks or Carrots? Comparing Effectiveness of Government Informal Economy Policies in Russia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 605-637, December.
    10. Benno Torgler, 2021. "The Power of Public Choice in Law and Economics," CREMA Working Paper Series 2021-04, Center for Research in Economics, Management and the Arts (CREMA).
    11. James Alm & Antoine Malézieux, 2021. "40 years of tax evasion games: a meta-analysis," Experimental Economics, Springer;Economic Science Association, vol. 24(3), pages 699-750, September.
    12. Lubomir Cingl & Tomas Lichard & Tomas Miklanek, 2022. "Mist Over a Meadow: Tax Designation Effects on Compliance," CERGE-EI Working Papers wp725, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    13. Jana Cahlikova & Lubomir Cingl & Katerina Chadimova & Miroslav Zajicek, 2021. "Carrots, Sticks, or Simplicity? Field Evidence on What Makes People Pay TV Fees," Working Papers tax-mpg-rps-2021-12, Max Planck Institute for Tax Law and Public Finance.
    14. D’Attoma, John & Volintiru, Clara & Steinmo, Sven, 2017. "Willing to share? Tax compliance and gender in Europe and America," LSE Research Online Documents on Economics 89397, London School of Economics and Political Science, LSE Library.
    15. Leo Ahrens & Lukas Hakelberg & Thomas Rixen, 2022. "A victim of regulatory arbitrage? Automatic exchange of information and the use of golden visas and corporate shells," Regulation & Governance, John Wiley & Sons, vol. 16(3), pages 653-672, July.
    16. Fabio Lamantia & Mario Pezzino, 2021. "Social norms and evolutionary tax compliance," Manchester School, University of Manchester, vol. 89(4), pages 385-405, July.
    17. Benno Torgler, 2022. "The power of public choice in law and economics," Journal of Economic Surveys, Wiley Blackwell, vol. 36(5), pages 1410-1453, December.
    18. Samiji, Ally A. & Chegere, Martin J. & Ruhinduka, Remidius D., 2023. "The Effect of Carrot and Stick Measures in Fostering Taxpayer Compliance in Tanzania: Evidence from a Laboratory Experiment," African Journal of Economic Review, African Journal of Economic Review, vol. 11(5), December.
    19. Naeem Hayat & Anas A. Salameh & Abdullah Al Mamun & Mohd Helmi Ali & Zafir Khan Mohamed Makhbul, 2022. "Tax Compliance Behavior Among Malaysian Taxpayers: A Dual-stage PLS-SEM and ANN Analysis," SAGE Open, , vol. 12(3), pages 21582440221, September.
    20. Cingl, Lubomír & Lichard, Tomáš & Miklánek, Tomáš, 2023. "Tax designation effects on compliance: An online experiment with taxpayers," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 615-633.
    21. Cyril Chimilila & Remidius Ruhinduka & Vincent Leyaro, 2023. "The design and revenue impact of a tax receipts lottery: A lab experiment in Tanzania," Discussion Papers 2023-02, University of Nottingham, CREDIT.
    22. Paul Carrillo & Edgar Castro & Carlos Scartascini, 2017. "Do Rewards Work?: Evidence from the Randomization of Public Works," IDB Publications (Working Papers) 98459, Inter-American Development Bank.
    23. Vincenzo Adamo, 2021. "Dynamic Process Models for the Evaluation of the Compliance Level Evolution: Evidence from Italy," SN Operations Research Forum, Springer, vol. 2(2), pages 1-27, June.
    24. Gaetano Lisi, 2023. "Tax Audits, Tax Rewards and Labour Market Outcomes," Economies, MDPI, vol. 11(2), pages 1-12, February.

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