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Attitudes, Incentives, and Tax Compliance

Author

Listed:
  • V. Umashanker Trivedi
  • Mohamed Shehata
  • Stuart Mestelman

Abstract

Our study examines whether combining experimental economics and economics psychology techniques can provide a better understanding of individuals’ tax compliance decisions in the laboratory. We find that considering individuals’ attitudinal, personality and intention measures in addition to economic based variables provides a richer understanding of individuals’ actual tax compliance decisions in the laboratory in the face of monetary incentives. We also find that hypothetical and actual compliance decisions in the laboratory are significantly different from each other. Specifically, we find that actual (hypothetical) compliance decisions are significantly influenced by their moral reasoning (anti-establishment) views. Finally, we find that individuals’ actual complianc decisions in the laboratory correlate more significantly with their admission of prior evasion than either their hypothetical compliance decisions or their responses to case scenarios. The latter result, coupled with the lack of appropriate field data on tax compliance, indicates that actual compliance decisions in the laboratory in the face of monetary incentives and with the use of tax terms in the instructions may be an ideal method of obtaining data on individuals’ tax compliance.

Suggested Citation

  • V. Umashanker Trivedi & Mohamed Shehata & Stuart Mestelman, 2004. "Attitudes, Incentives, and Tax Compliance," McMaster Experimental Economics Laboratory Publications 2004-04, McMaster University.
    • Handle: RePEc:mcm:mceelp:2004-04
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    References listed on IDEAS

    as
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    12. Alm, James & Jackson, Betty R. & McKee, Michael, 1993. "Fiscal exchange, collective decision institutions, and tax compliance," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 285-303, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ibanez, Marcela & Carlsson, Fredrik, 2008. "A choice experiment on coca cropping," Working Papers in Economics 287, University of Gothenburg, Department of Economics, revised 01 Apr 2008.
    2. Boris Maciejovsky & Herbert Schwarzenberger & Erich Kirchler, 2012. "Rationality Versus Emotions: The Case of Tax Ethics and Compliance," Journal of Business Ethics, Springer, vol. 109(3), pages 339-350, September.
    3. Brinja Meiseberg & Thomas Ehrmann & Aloys Prinz, 2017. "“Anything worth winning is worth cheating for”? Determinants of cheating behavior among business and theology students," Journal of Business Economics, Springer, vol. 87(8), pages 985-1016, November.
    4. TODOR Silvia Paula & DUMITER Florin Cornel & BREZEANU Petre, 2016. "The Influence Of Fiscal Pressure On The Taxpayers Behavior," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 68(3), pages 178-193, December.
    5. Erich Kirchler & Stephan Muehlbacher & Barbara Kastlunger & Ingrid Wahl, 2007. "Why Pay Taxes? A Review of Tax Compliance Decisions," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0730, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Alex Reuben Kira, 2017. "An Evaluation of Governments’ Initiatives in Enhancing Small Taxpayers’ Voluntary Tax Compliance in Developing Countries," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(1), pages 253-267, January.
    7. Triadi Agung Sudarto & Dodik Juliardi, 2022. "The effect of perceptions on tax evasion and tax sanction on ethical behaviour of accounting student compliance," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(10), pages 206-216, December.
    8. Iswahyudi, Heru, 2018. "Economic Consequences of Tax Non-Compliance: Evidence From Indonesia," MPRA Paper 122337, University Library of Munich, Germany.
    9. Ibanez, Marcela & Martinsson, Peter, 2008. "Can we do policy recommendations from a framed field experiment? The case of coca cultivation in Colombia," Working Papers in Economics 306, University of Gothenburg, Department of Economics.
    10. Kirchler, Erich & Hoelzl, Erik & Wahl, Ingrid, 2008. "Enforced versus voluntary tax compliance: The "slippery slope" framework," Journal of Economic Psychology, Elsevier, vol. 29(2), pages 210-225, April.
    11. Iswahyudi, Heru, 2018. "Where has the money gone?: The case of Value Added Tax revenue performance in Indonesia," MPRA Paper 89876, University Library of Munich, Germany.
    12. Antinyan, Armenak & Corazzini, Luca & Pavesi, Filippo, 2020. "Does trust in the government matter for whistleblowing on tax evaders? Survey and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 77-95.
    13. Kirchler, Erich & Niemirowski, Apolonia & Wearing, Alexander, 2006. "Shared subjective views, intent to cooperate and tax compliance: Similarities between Australian taxpayers and tax officers," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 502-517, August.

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    JEL classification:

    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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