Tax Evasion and Institutions. An Experiment on The Role of Principal Witness Regulations

Johannes Buckenmaier, Eugen Dimant and Luigi Mittone

No 7, PPE Working Papers from Philosophy, Politics and Economics, University of Pennsylvania

Abstract: We experimentally study the effectiveness of a principal witness regulation on tax compliance when tax evasion is nested within a corruption framework. Subjects repeatedly declare taxes in institutional environments with and without a principal witness regulation. Our experimental design allows us not only to compare tax compliance under both regimes, but also to investigate whether a transition from one regime to the other can increase compliance or break up established collusive patterns. The results suggest that tax compliance is higher in the presence of a principal witness regulation when the regime is fixed. However, the transition towards a regime with a principal witness regulation has the opposite effect, i.e. introducing it in later rounds causes a drop in compliance. We provide evidence that the effectiveness of new political measures cannot reliably be judged in isolation, but must be considered in view of the actual institutional history, that is the particular institutional framework in place before the measure is introduced.

Keywords: Corruption; Institutions; Principal Witness Regulation; Tax Compliance; Tax Evasion (search for similar items in EconPapers)
JEL-codes: D03 D73 D81 H26 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2016-07
New Economics Papers: this item is included in nep-cse, nep-exp, nep-iue, nep-pbe and nep-pub
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http://www.sas.upenn.edu/ppe-repec/ppc/wpaper/0007.pdf Second version, 2016 (application/pdf)

Related works:
Working Paper: Effects of Institutional History and Leniency on Collusive Corruption and Tax Evasion (2018)
Working Paper: Effects of institutional history and leniency on collusive corruption and tax evasion (2018)
Working Paper: Effects of Institutional History and Leniency on Collusive Corruption and Tax Evasion (2017)
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