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What Goes Around Comes Around? Experimental Evidence of the Effect of Rewards on Tax Compliance

Author

Listed:
  • Barbara Kastlunger

    (University of Vienna, Vienna, Austria, barbara.kastlunger@univie.ac.at)

  • Stephan Muehlbacher

    (University of Vienna, Vienna, Austria)

  • Erich Kirchler

    (University of Vienna, Vienna, Austria)

  • Luigi Mittone

    (CEEL-Computable and Experimental Economics Laboratory, University of Trento, Trento, Italy)

Abstract

The current experimental study examined the effect of monetary rewards on tax compliance. Eighty-six participants were randomly assigned to one control and two reward conditions (low vs. high reward). Overall, tax compliance was not affected by the rewards. However, a change in compliance strategies was observed. It seems that rewards provoked an all-or-nothing behavior. Whereas in the reward conditions, participants were either completely honest or evaded all of their income, in the control condition, the amount of evasion varied more strongly. Furthermore, audited compliant taxpayers who are rewarded evaded less in the following period compared with audited compliant taxpayers who experienced no rewards.

Suggested Citation

  • Barbara Kastlunger & Stephan Muehlbacher & Erich Kirchler & Luigi Mittone, 2011. "What Goes Around Comes Around? Experimental Evidence of the Effect of Rewards on Tax Compliance," Public Finance Review, , vol. 39(1), pages 150-167, January.
    • Handle: RePEc:sae:pubfin:v:39:y:2011:i:1:p:150-167
    DOI: 10.1177/1091142110376518
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    References listed on IDEAS

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    Cited by:

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    2. International Monetary Fund, 2016. "Albania: Selected Issues," IMF Staff Country Reports 2016/143, International Monetary Fund.
    3. Fatas, Enrique & Nosenzo, Daniele & Sefton, Martin & Zizzo, Daniel John, 2021. "A self-funding reward mechanism for tax compliance," Journal of Economic Psychology, Elsevier, vol. 86(C).
    4. 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.
    5. Gaetano Lisi, 2023. "Tax evasion, tax reward and the optimal fiscal policy," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2023(3), pages 309-327.
    6. 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.
    7. Janina Enachescu & Žiga Puklavec & Christian Martin Bauer & Jerome Olsen & Erich Kirchler & James Alm, 2019. "Incidental Emotions, Integral Emotions, and Decisions to Pay Taxes," Working Papers 1909, Tulane University, Department of Economics.
    8. Burgstaller, Lilith & Doerr, Annabelle & Necker, Sarah, 2023. "Incentives for Consumers to Act as Tax Auditors: (When) Are They Effective?," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277628, Verein für Socialpolitik / German Economic Association.
    9. Aloys Prinz, 2019. "Learning (Not) to Evade Taxes," Games, MDPI, vol. 10(4), pages 1-18, September.
    10. Gaetano Lisi, 2019. "Slippery slope framework, tax morale and tax compliance: a theoretical integration and an empirical assessment," Discussion Papers in Economic Behaviour 0219, University of Valencia, ERI-CES.

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