Do Household Tax Credits Increase the Demand for Legally Provided Services?

Lilith Burgstaller, Annabelle Doerr and Sarah Necker

No 10211, CESifo Working Paper Series from CESifo

Abstract: We study the causal effects of household tax credits on the willingness to demand legally provided services using two survey experiments with 1.974 German homeowners. Participants choose between hypothetical offers of service providers and are randomly assigned to a policy scenario 1) without a tax credit, 2) a tax credit households can claim through the annual tax return, or 3) a tax credit granted by the seller at source. We also vary the refund rate of the tax credit (20/30%) and whether the price including the tax reduction is displayed. All tax credits increase the willingness to pay for offers with invoice as well as the probability to select an offer with invoice. The effectiveness of the tax credit is significantly higher when two attractive features (at source+30%) are combined or when the reduction is made salient. We estimate that about two thirds of respondents who would use the tax credit would have demanded an offer without invoice also without the tax credit.

Keywords: tax credit; financial rewards for compliance; tax evasion; tax compliance; third-party reporting; survey experiment; discrete choice experiment (search for similar items in EconPapers)
JEL-codes: C93 E26 H26 J22 O17 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-dcm, nep-eur, nep-exp, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10211

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