The effect of tax privacy on tax compliance: An experimental investigation

Kay Blaufus, Jonathan Bob and Philipp E. Otto

No 164, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre

Abstract: In this paper, a tax game with audit costs as a public bad is designed to investigate the impact of public disclosure on tax evasion experimentally. Three different types of tax privacy are tested, ranging from complete privacy to full disclosure. We expect to observe two different effects: first, a contagion effect, arising when an individual observes non-compliance of other individuals and therefore reduces his own tax compliance; second, a shame effect of increased tax compliance due to the anticipated shame of being declared a tax evader. We find evidence of increasing tax evasion with reduced tax privacy if information is disclosed anonymously. Our results also indicate that the shame effect is not strong enough to override the contagion effect when both effects are present. Our results are of particular importance for fiscal policy because public disclosure may lead to more evasion instead of less, due to motivational crowding-out of tax morale.

Keywords: Tax privacy; Tax evasion; Public bad; Social norm; Conditional cooperation; Economic experiment (search for similar items in EconPapers)
JEL-codes: H24 H26 H30 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in 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 (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:arqudp:164

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