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A self-funding reward mechanism for tax compliance

Enrique Fatas, Daniele Nosenzo, Martin Sefton and Daniel Zizzo

No 15-16, Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) from School of Economics, University of East Anglia, Norwich, UK.

Abstract: We compare in a laboratory experiment two audit-based tax compliance mechanisms that collect fines from those found non- compliant. The mechanisms differ in the way fines are redistributed to individuals who were either not audited or audited and found to be compliant. The first, as is the case in most extant tax systems, does not discriminate between the unaudited and those found compliant. The second targets the redistribution in favor of those found compliant. We find that targeting increases compliance when paying taxes generates a social return. We do not find any increase in compliance in a control treatment where individuals audited and found compliant receive symbolic rewards. It is not the mere assigning of rewards, but the material incentives inherent in the rewards that improve compliance. We conclude that existing tax mechanisms have room for improvement by rewarding financially those audited and found compliant.

Keywords: tax evasion; rewards; audits (search for similar items in EconPapers)
JEL-codes: C91 J26 (search for similar items in EconPapers)
Date: 2015-08-24
New Economics Papers: this item is included in nep-acc, nep-exp and nep-pbe
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Journal Article: A self-funding reward mechanism for tax compliance (2021) Downloads
Working Paper: A Self-Funding Reward Mechanism for Tax Compliance (2015) Downloads
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