Can Whistleblower Programs Reduce Tax Evasion? Experimental Evidence

David Masclet (), Claude Montmarquette and Nathalie Viennot-Briot
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Nathalie Viennot-Briot: Centre interuniversitaire de recherche en analyse des organisations (CIRANO), Montréal, Québec (Canada)

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

Abstract: There are many ways of tackling tax evasion. The traditional strategies implemented by tax authorities fight fiscal fraud through audit and penalties. However, there also exist a plethora of unconventional methods, such as whistleblower programs. Although there is a rich economic literature on tax evasion, auditing and penalties, tax agencies’ heavy reliance on whistleblower programs has mostly been ignored. We ran an experiment in which taxpayers can punish tax evaders by reporting them to the authorities, even though it is costly for them to do so and despite the lack of any material benefit from doing so. Information on other taxpayers' compliance rates together with the opportunity to report tax evaders has a positive and a very significant effect on the level of income reported. Observing the compliance rates of other participants alone does not suffice to increase tax revenues, while the mere threat of being reported significantly increases revenues.

Keywords: fiscal fraud; whistleblowers; ambiguous risk; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 H26 H31 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-acc, nep-cbe, nep-exp and nep-iue
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Related works:
Journal Article: Can whistleblower programs reduce tax evasion? Experimental evidence (2019)
Working Paper: Can Whistleblower Programs Reduce Tax Evasion? Experimental Evidence (2019)
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