 Can strategic uncertainty help deter tax evasion? An experiment on auditing rulesJournal of Economic Psychology, 2014, vol. 40, issue C, 161-174 Abstract: This paper adds to the economic-psychological research on tax compliance by experimentally testing a simple auditing rule that induces strategic uncertainty among taxpayers. Under this rule, termed the bounded rule, taxpayers are informed of the maximum number of audits by a tax authority, so that the audit probability depends on the joint decisions among the taxpayers. We compare the bounded rule to the widely studied flat-rate rule, where taxpayers are informed that they will be audited with a constant probability. The experimental evidence shows that, as theoretically predicted, the bounded rule induces the same level of compliance as the flat-rate rule when strategic uncertainty is low, and a higher level of compliance when strategic uncertainty is high. The bounded rule also induces distinctive tax evasion dynamics compared to the flat-rate rule. The results suggest that increasing the level of strategic uncertainty among taxpayers could be an effective device to deter tax evasion. Keywords: Tax auditing; Tax compliance; Strategic uncertainty; Behavioral dynamics; Laboratory experiment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:40:y:2014:i:c:p:161-174 DOI: 10.1016/j.joep.2012.11.005 Access Statistics for this article Journal of Economic Psychology is currently edited by G. Antonides and D. Read More articles in Journal of Economic Psychology from Elsevier |
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