Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97270
Authors: 
Fochmann, Martin
Kroll, Eike B.
Year of Publication: 
2014
Series/Report no.: 
Arqus-Diskussionsbeiträge zur quantitativen Steuerlehre 163
Abstract: 
We analyze how the redistribution of tax revenues influences tax compliance behavior by applying different reward mechanisms. In our experiment, subjects have to make two decisions. In the first stage, subjects decide on the contribution to a public good. In the second stage, subjects declare their income from the first stage for taxation. Our main results are threefold: First, from an aggregated perspective, rewards have a negative overall effect on tax compliance. Second, we observe that rewards affect the decision of taxpayers asymmetrically. In particular, rewards have either no effect (for those who are rewarded) or a negative effect (for those who are not rewarded) on tax compliance. Thus, if a high compliance rate of taxpayers is preferred, rewards should not be used by the tax authority. Third, we find an inverse u-shaped relationship between public good contribution and tax compliance. In particular, up to a certain level, tax compliance increases with subjects' own contributions to the public good. Above this level, however, tax compliance decreases with the public good contribution.
Subjects: 
tax evasion
tax compliance
redistribution of taxes
tax affectation
rewarding
public good
behavioral economics
experimental economics
JEL: 
C91
D14
H24
Document Type: 
Working Paper

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