The Effect of Awareness and Incentives on Tax Evasion

Annette Alstadsæter and Martin Jacob

No 4369, CESifo Working Paper Series from CESifo

Abstract: We examine the role of tax incentives, tax awareness, and complexity in tax evasion. We observe a specific type of tax evasion among business owners in Swedish administrative panel data, after the tax authority has approved all tax returns. For the period 2006–2009, approximately 5% of tax returns overstate a claimed dividend allowance. Tax awareness decreases and complexity increases the likelihood of misreporting. Our results indicate that some observed misreporting could be accidental, while some misreporting is deliberate tax evasion. We identify a positive and significant effect of tax rates on tax evasion, by exploiting a large kink in the tax schedule. The majority of misreporting cases remains undetected by the tax authority. Self-correction of tax evasion by taxpayers is the dominant type of detection.

Keywords: tax evasion; tax compliance; tax enforcement; tax awareness; detection (search for similar items in EconPapers)
JEL-codes: D14 H24 H26 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The effect of awareness and incentives on tax evasion (2013)
Working Paper: The effect of awareness and incentives on tax evasion (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4369

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