No abstract

Cashless payments discourage value‐added tax (VAT) evasion through transaction records; and they essentially require cooperation from consumers and small business owners. As indirect VAT payers, consumers' payment methods decisively influence the final VAT declaration. However, the literature has yet to investigate consumers' collusive VAT evasion. This study uses data from approximately 7300 taxpayers as collected by the National Survey of Tax and Benefit of South Korea to examine the impacts of perceived trust paradigms on consumers' responses to payment methods when small business owners offer discount benefits. The results reveal that perceived trust in government significantly strengthens consumers' cooperative VAT compliance. We also discover that when the discount amounts are higher, trust has a greater impact on cooperative VAT compliance. The study contributes to the tax literature by demonstrating that trust can improve consumers' cooperative VAT compliance.

Using South Korean panel data from 2008 to 2019 and censored quantile regression method, this study calculates the effects of different tax incentives on charitable contributions. We observe price elasticity under two different tax-benefit systems in South Korea and find that, first, taxpayers tend to be more sensitive to tax incentives under a tax deduction system than a tax credit system.The price elasticity gap between a tax deduction and tax credit is approximately À2.3 to À1.0. Second, we show the existence of heterogeneity in taxpayers' behaviour: the price elasticity of charitable contributions exhibits a convex shape, where more significant donors have lesser reactions to tax incentives. We further show that socioeconomic contexts, such as income, gender, marital status, and education, affect people's attitudes. In sum, the results are as expected: tax deductions work more efficiently than tax credits.