Declaring income versus declaring taxes in tax compliance experiments: Does the design of laboratory experiments affect the results?

Stephan Muehlbacher, Andre Hartmann, Erich Kirchler () and James Alm ()
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Stephan Muehlbacher: Karl Landsteiner University of Health Sciences
Andre Hartmann: University of Vienna
Erich Kirchler: University of Vienna

No 2210, Working Papers from Tulane University, Department of Economics

Abstract: Laboratory experiments are frequently criticised, in part because of the sensitivity of the results to specific features of the design. This paper addresses an important question regarding the key aspect of the experimental environment: How should the dependent variable – participants’ choices – be operationalised? For the specific context of laboratory research on income tax compliance, we compare the effects of the two most common operationalisation types: the declaration of gross income versus the declaration of tax payment. It is found that compliance is higher when participants indicate their tax payment than when they declare their income. It is also discovered that the effects of the three policy parameters of the economic model (tax rate, audit probability, and fine rate) are stronger when participants declare their taxes than when they declare their income. These results are relevant for interpreting prior and future experimental evidence on tax compliance and can explain some contradictory previous findings. More broadly, this study suggests that the results of laboratory experiments may depend on specific features of the experimental design, which proposes a strong need for more systematic methodological research.

Keywords: Laboratory experiments; experimental design; tax compliance; tax rate; audit probability; fine rate (search for similar items in EconPapers)
JEL-codes: B41 C90 C91 H26 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-acc, nep-exp, nep-iue, nep-pbe and nep-pub
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http://repec.tulane.edu/RePEc/pdf/tul2210.pdf First Version, November 2022 (application/pdf)

Related works:
Journal Article: Declaring income versus declaring taxes in tax compliance experiments: Does the design of laboratory experiments affect the results? (2023)
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