From the Lab to the Field: A Review of Tax Experiments

Abstract

Tax experiments have been gaining momentum in recent years, although this literature dates back several decades. With new developments in methods and data availability, tax experiments have gradually moved away from lab settings and towards the field. This movement from the lab to the field has happened against the background of the ‘credibility revolution’ in applied economics, which has seen more rigorous methods applied to policy relevant questions, and of the availability to researchers of administrative data from tax returns. These developments have allowed significant advances in the experimental literature on tax compliance. This paper reviews this literature, giving particular attention to field experiments using administrative data, but putting them in the broader context of the compliance literature. A particular effort is made to take a global perspective, in a literature that is only recently seeing the emergence of evidence from Africa, Latin America and Asia.

One Size Does Not Fit All: A Field Experiment on the Drivers of Tax Compliance and Delivery Methods in Rwanda

“…Taxpayers with longer names were abbreviated automatically after the 14th character. In line with the best practice in behavioural economics (BIT 2012) and in the empirical tax experiments literature (Hallsworth 2014;Mascagni 2016), all messages were addressed to taxpayers using their names and were simple and concise -five short sentences at most. To maximise reach and facilitate understanding, our messages were translated in two languages: English and Kinyarwanda.…”

“…Although most tax experiments in the literature do not take spillovers explicitly into account (Mascagni 2016), recent studies have shown that they can be sizeable (Drago, Mengel, and Traxler 2015;Carrillo, Castro, and Scartascini 2016). Although we do not formally consider spillovers across firms, we use cluster-corrected standard errors based on districts.…”

“…2 Comprehensive reviews of theoretical and empirical studies on tax compliance are available in Hashimzade, Myles, and Tran-Nam (2013) and Mascagni (2016), respectively. 3 More details on the design and key findings of tax experiments in the existing literature can be found in Mascagni (2016). 4 For a more detailed discussion of tax morale and its components, see Luttmer and Singhal (2014).…”

PEFA, Public Financial Management, and Good Governance

“…Empirical findings from both lab experiments and field research made it increasingly clear that, in the real world, taxpayers are unsure about their chances of getting audited, and this has a considerable effect on their compliance decision (Andreoni, Erard, and Feinstein 1998;Beck, Davis, and Jung 1991;Kleven et al 2011;Slemrod, Blumenthal, and Christian 2001;Spicer and Hero 1985;Thomas and Spicer 1982). Uncertainty with regard to the risk of facing a penalty for evasion tends to make taxpayers overly cautious, resulting in increasing compliance (Mascagni 2017).…”

Beyond Deterrence: An Empirical and Experimental Analysis of Tax Compliance Behaviour in Indonesia

“…Most of these studies were conducted in the US, although a few were conducted in developed countries. Therefore, there are still some gaps in the literature, particularly in regard to the implementation of this method in developing countries (Mascagni, 2016). …”