Happy taxation: increasing tax compliance through positive rewards?

Brockmann, Hilke; Genschel, Philipp; Seelkopf, Laura

doi:10.1017/s0143814x15000331

Cited by 52 publications

(48 citation statements)

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“…8 Asian countries have also implemented reward systems, with Japan offering the opportunity to have a picture taken with the Emperor and the Philippines placing the names of compliant taxpayers into a lottery (Feld et al 2006). Experimental studies have taken up these ideas and in the controlled setting of the laboratory have examined how (ex ante announced) rewards affect compliance (Brockmann et al 2016, Fochmann and Kroll 2016, Bazart and Pickhard 2011, Torgler 2003, Alm et al 1992. Findings are, however, ambiguous.…”

Section: Promises As a Commitment Devicementioning

confidence: 99%

Commitment to pay taxes: Results from field and laboratory experiments

Koessler

Torgler

Feld

et al. 2019

European Economic Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ABSTRACTThe ability of a tax authority to collect taxes successfully depends on both its relationship with taxpayers and how strongly these taxpayers are committed to contributing to the common good. We present field and laboratory experimental evidence on a new non-intrusive approach aimed at fostering the commitment to pay taxes. Using a between-subject design in a unique field setting, we analyze whether tax compliance changes if taxpayers receive an offer to promise paying their taxes on time. Taxpayers who complied with the promise entered into a lottery with the chance of winning either a financial or a non-financial reward. Rewards were also offered in response to compliance only (i.e., without being asked to make a formal promise) allowing us to disentangle a pure reward effect from the commitment effect. As potential legal obstacles prevented us from developing a treatment that allowed for identifying whether the promise itself changes behavior, we designed and conducted a laboratory experiment to test this proposition. In the field experiment, taxpayers with a history of being compliant are more likely to make a promise. Similarly, the laboratory experiment indicates that individuals with higher tax morale are more compliant and more likely to make the promise. In addition, for all promise schemes, compliance is significantly higher for the promise-makers as compared to subjects in the control group and to those who did not make a promise. The field experiment indicates that commitment can improve payment behavior. This effect, however, is strongly dependent on the type of reward to which the promise is linked. Compliance increases only if the reward is non-financial. A no compliance effect is observed if cash is offered in return for promise fulfilment. A strong compliance effect for pure non-financial rewards was also obtained in the laboratory experiment.

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Section: Promises As a Commitment Devicementioning

confidence: 99%

Commitment to pay taxes: Results from field and laboratory experiments

Koessler

Torgler

Feld

et al. 2019

European Economic Review

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“…Most of the evidence supporting the role of reciprocity comes either from laboratory experiments (Alm et al, 1992;Torgler, 2003;Brockmann et al, 2016) or field experiments that have relied on sending messages to taxpayers regarding the use of money by the government. For example, Hallsworth et al (2014) finds a positive effect of reminding people of the relationship between taxes and public goods received.…”

Section: Conceptual Frameworkmentioning

confidence: 99%

“…Similar conflicting results have been found in laboratory settings. For example Brockmann et al (2016) shows that reward treatments improved female participants compliance but men reacted in the opposite way.…”

Section: Introductionmentioning

confidence: 99%

Do Rewards Work?: Evidence from the Randomization of Public Works

Carrillo¹,

Castro²,

Scartascini³

2017

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2017 Abstract * This paper evaluates the effect of positive inducements on tax behavior by exploiting a natural experiment in which a municipality of Argentina randomly selected 400 individuals among more than 72,000 taxpayers who had complied with payment of their property tax. These individuals were publicly recognized and awarded the construction of a sidewalk. Results indicate that: i) being selected in the lottery and publicly recognized by the government has a positive but not persistent effect on future compliance; ii) receiving the sidewalk has a large positive and persistent effect; iii) high and persistent spillover effects exist: some neighbors of those who receive the reward comply more too, and these effects can be even larger than the direct effects; and iv) there is no financial motive effect; i.e., people do not pay their taxes just to participate in the lottery. Recognition serves only as a short-term incentive, but the provision of a durable and visible good has more persistent and broader effects. These findings provide evidence on features that make a positive inducement more successful, whether for tax compliance or other policy purposes.JEL classifications: C93, H42, H23, D62

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“…Similar initiatives relying on consumer auditing schemes were proposed in the European Union and in China; see, for example, Wan (2010). The effectiveness of such programs has been discussed in Fatas, Nosenzo, Sefton, and Zizzo (2015) and Brockmann, Genschel, and Seelkopf (2016). In the Brazilian state of São Paulo, the NFP program has received extensive support from the population.…”

Section: The Effects Of An Anti Tax Evasion Program On Inflationmentioning

confidence: 99%

ArCo: An artificial counterfactual approach for high-dimensional panel time-series data

Carvalho

Masini

Medeiros

2018

Journal of Econometrics

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We consider a new, flexible and easy-to-implement method to estimate causal effects of an intervention on a single treated unit and when a control group is not readily available. We propose a two-step methodology where in the first stage a counterfactual is estimated from a large-dimensional set of variables from a pool of untreated units using shrinkage methods, such as the Least Absolute Shrinkage Operator (LASSO). In the second stage, we estimate the average intervention effect on a vector of variables, which is consistent and asymptotically normal. Our results are valid uniformly over a wide class of probability laws. Furthermore, we show that these results still hold when the exact date of the intervention is unknown. Tests for multiple interventions and for contamination effects are also derived. By a simple transformation of the variables of interest, it is also possible to test for intervention effects on several moments (such as the mean or the variance) of the variables of interest. A Monte Carlo experiment evaluates the properties of the method in finite samples and compares it with other alternatives such as the differences-indifferences , factor and the synthetic control methods. In an application we evaluate the effects on inflation of an anti tax evasion program.

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Happy taxation: increasing tax compliance through positive rewards?

Cited by 52 publications

References 50 publications

Commitment to pay taxes: Results from field and laboratory experiments

Commitment to pay taxes: Results from field and laboratory experiments

Do Rewards Work?: Evidence from the Randomization of Public Works

ArCo: An artificial counterfactual approach for high-dimensional panel time-series data

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