The ghost of institutions past: History as an obstacle to fighting tax evasion

Aaron Kamm, Christian Koch and Nikos Nikiforakis ()

VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association

Abstract: If taxpayers believe past rates of compliance are indicative of the future, traditional measures for combating tax evasion can be compromised. We present evidence from a novel laboratory experiment with strategic complementarities showing that a history of low compliance can render a major institutional reform ineffective at reducing tax evasion. The experimental treatments manipulate the history of tax compliance by varying the percentage of tax revenue embezzled by a ‘politician’ – our measure of ‘institutional quality’. We show that tax compliance is substantially higher in good-quality than bad-quality institutions when there is no history of tax evasion. When a bad-quality institution is replaced with a good-quality one, however, tax compliance remains low, as if the institutional change had not occurred. The reason is that the institutional change leaves expectations about future compliance largely unaffected. A history of high-quality institutions, on the other hand, shields tax compliance only partly from institutional deterioration. We discuss reasons for this, policy implications of our findings and evidence that a society-wide poll can assist in overcoming the ‘ghost of institutions past’.

Keywords: tax evasion; interdependence; multiple equilibria; path dependence; experiment (search for similar items in EconPapers)
JEL-codes: C92 H26 (search for similar items in EconPapers)
Date: 2017, Revised 2017
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp, nep-his, nep-iue and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/170539/1/VfS-2017-pid-3512-rev.pdf (application/pdf)

Related works:
Working Paper: The ghost of institutions past: History as an obstacle to fighting tax evasion (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc17:168271

Access Statistics for this paper

More papers in VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().