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An experimental analysis of tax avoidance policies

Samreen Malik (), Benedikt Mihm () and Florian Timme ()
Additional contact information
Samreen Malik: New York University – Abu Dhabi
Benedikt Mihm: Otto-von-Guericke University
Florian Timme: Otto-von-Guericke University

International Tax and Public Finance, 2018, vol. 25, issue 1, 200-239

Abstract: Abstract Policies to reduce aggressive tax avoidance are increasingly being implemented or discussed in many countries around the world. Tax authorities hope that such policies will generate new tax revenue by increasing overall tax compliance. We present an experimental design to investigate the effect of a stylized anti-avoidance tax policy on tax compliance behavior. We highlight that anti-avoidance tax policies that reduce tax avoidance can also induce an increase in tax evasion (“substitution effect”), which limits the additional tax revenue these policies will generate. We show that the degree of substitution depends crucially on behavioral factors such as tax morale. Policymakers therefore also need to consider behavioral features while designing such policies and estimating their potential effects.

Keywords: Anti-avoidance tax rules (AAR); Aggressive tax avoidance; Tax evasion; Compliance (search for similar items in EconPapers)
JEL-codes: H26 C91 K34 (search for similar items in EconPapers)
Date: 2018
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