Collaborative Tax Evasion in the Provision of Services to Consumers: A Field Experiment

Abstract

We conduct a field experiment with sellers of home improvement services on two German online markets. We take the role of consumers and vary whether we request an invoice for the delivery of the service. In a market that allows anyone to sell anonymously, a willingness to evade is prevalent. In a market that keeps track of credentials, sellers are only willing to evade when a willingness to collude is signaled. The evasion discount is in most estimates not larger than the tax subsidy for legal demand. Evasion is unlikely to be beneficial for many consumers in our setting. (JEL C93, H25, H26, L84)

Card or cash? Evidence regarding consumers' cooperative value‐added tax compliance

“…For example, Naritomi (2019) investigates the enforcement value of third-party information on potentially collusive taxpayers, emphasizing that consumers can act as whistle-blowers to deter VAT evasion. Doerr and Necker (2021) run a large-scale natural field experiment and provide empirical evidence showing that suppliers reward consumers who are willing to collaborate with the gain from VAT evasion. However, to the best of our knowledge, there is no empirical evidence on the psychological factors that shape collaborative tax evasion on the part of consumers.…”

You Don't Need an Invoice, Do You? An Online Experiment on Collaborative Tax Evasion

“…Although tax withholding schemes and third-party reporting have been found to effectively increase tax compliance (Pomeranz, 2015;Kleven et al, 2011), when two parties collude, they can bypass third-party reporting. This has only recently received attention in the literature (see Doerr & Necker, 2021;Bjørneby et al, 2021;Kotakorpi et al, 2021). In collaborative tax evasion, two parties engage in coordination about compliance.…”

“…Decision-making is interactive since it involves communication and exchange of intentions. By offering a discount (Chang & Lai, 2004;Doerr & Necker, 2021) or discussing the risk of detection (Lohse & Simon, 2021), parties can convince each other of evasion. Moreover, the behavior and acceptance of others impact joint decisionmaking (Abraham et al, 2017), suggesting that we should examine social norms more specifically.…”

Working in the shadow: Survey techniques for measuring and explaining undeclared work

“…2 Macro approaches include the monetary transaction method, the currency demand approach, the income gap method, the electricity approach, the discrepancy method and the MIMIC estimation procedure (see Dybka et al, 2019;Giles et al, 2002, for recent applications). Micro approaches include surveys with direct or indirect questioning, estimations with tax audit data as well as laboratory and field experiments (see Žukauskas & Schneider, 2016;Putnins & Sauka, 2021;Doerr & Necker, 2021, for recent applications).…”

“…5 Recently, the literature on determinants of joint tax evasion in field experiments (Doerr & Necker, 2021;Bjørneby et al, 2021) and lab experiments (Burgstaller & Pfeil, 2022;Lohse & Simon, 2021;Fochmann et al, 2021;Balafoutas et al, 2015;Abraham et al, 2017) has been growing immensely.…”