What Goes Around Comes Around? Experimental Evidence of the Effect of Rewards on Tax Compliance

Barbara Kastlunger, Stephan Muehlbacher, Erich Kirchler and Luigi Mittone
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Barbara Kastlunger: University of Vienna, Vienna, Austria, barbara.kastlunger@univie.ac.at
Stephan Muehlbacher: University of Vienna, Vienna, Austria
Erich Kirchler: University of Vienna, Vienna, Austria

Public Finance Review, 2011, vol. 39, issue 1, 150-167

Abstract: The current experimental study examined the effect of monetary rewards on tax compliance. Eighty-six participants were randomly assigned to one control and two reward conditions (low vs. high reward). Overall, tax compliance was not affected by the rewards. However, a change in compliance strategies was observed. It seems that rewards provoked an all-or-nothing behavior. Whereas in the reward conditions, participants were either completely honest or evaded all of their income, in the control condition, the amount of evasion varied more strongly. Furthermore, audited compliant taxpayers who are rewarded evaded less in the following period compared with audited compliant taxpayers who experienced no rewards.

Keywords: tax compliance; fines; rewards; positive incentives; bomb-crater effect (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:39:y:2011:i:1:p:150-167

DOI: 10.1177/1091142110376518

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