Comparing Direct and Indirect Taxation: The Influence of Framing on Tax Compliance

Robert Ullmann and Christoph Watrin

European Journal of Comparative Economics, 2008, vol. 5, issue 1, 23-56

Abstract: Standard theory of the optimal mix of direct and indirect taxation implicitly assumes that compliance is not influenced by the framing of the taxes. According to our findings, this is not the case. Using an experimental approach, we examine whether framing the tax payment decision as income tax or consumption tax influences compliance. We find that median compliance is 10.2 percentage points higher in the income tax framing. Further, we find that subjects' reaction to a change in tax rates is comparable, but reaction towards a change in detection rates is higher in the consumption tax scheme. We conclude that behavioral patterns should be taken into account when drawing conclusions about the direct-indirect tax mix

Keywords: Comparative analysis of tax systems; behavioral public finance; optimal tax mix; noncompliance; framing (search for similar items in EconPapers)
JEL-codes: C91 H21 H24 H26 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:liu:liucej:v:5:y:2008:i:1:p:23-56

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