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Behavioral dynamics of tax compliance when taxpayer assistance services are available

Michael McKee, Caleb A. Siladke and Christian Vossler
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Caleb A. Siladke: University of Tennessee

International Tax and Public Finance, 2018, vol. 25, issue 3, 722-756

Abstract: Abstract This research utilizes a laboratory experiment involving a large and diverse set of participants to investigate the behavioral dynamics of tax reporting in a setting where tax liability is uncertain and the tax agency makes a service available to help resolve the uncertainty. Our design varies the level of liability uncertainty, as well as the cost and quality of the information service. We find that, in the absence of an information service regime, the behavioral response to past audits, whether penalizing or not, is to report a lower tax liability. However, with an information service present (regardless of whether it is accessed), behavioral responses to past audits are no longer found. Interestingly, information service acquisition decreases modestly in response to a penalizing audit, although as the experiment progressed a larger proportion of participants were compliant, offsetting this effect. Mirroring the few experimental studies that have investigated tax liability information services, we find that providing these services has a strong and positive effect on tax compliance.

Keywords: Tax evasion; Tax compliance; Behavioral dynamics; Behavioral economics; Experimental economics (search for similar items in EconPapers)
JEL-codes: H26 C91 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:kap:itaxpf:v:25:y:2018:i:3:d:10.1007_s10797-017-9466-z