Tax morale and fairness in conflict an experiment

Abstract

Arguably, for many citizens the perceived expected disutility from sanctions is smaller than the monetary gain from tax evasion. Nevertheless most people pay their taxes most of the time. In a lab experiment, we show that the willingness to pay taxes even absent enforcement is indeed pronounced. Yet voluntary compliance is reduced if participants learn that income is heterogeneous. The effect is driven by participants with the lowest income. The reduction obtains irrespective of the tax regime. If the tax is proportional to income, or progressive, participants become more skeptical about the willingness of participants with high income to comply.

Outcomes or participation? Experimentally testing competing sources of legitimacy for taxation

“…Notwithstanding these limitations, we believe that our experiment makes a valuable contribution to the understanding of taxpayer decisions. In our earlier experiment (Engel et al., 2020), we showed that the willingness to pay taxes was surprisingly pronounced, even if participants were not informed about the use of their money. This experiment made the situation one step more realistic.…”

“…In the economic textbooks, crimes are committed when the expected individual utility from breaking the law is higher than the expected disutility of the sanction (Becker, 1968). This utilitarian view has been contrasted with the claim that taxes are paid, as this is the prevailing social norm (Engel et al., 2020). It has further been argued that taxes are paid because taxpayers hold social preferences and support the financing of public projects.…”

People weigh salaries more than ratios in judgments of income inequality, fairness, and demands for redistribution

“…Our results contribute to the growing discussion about the psychological understanding of economic inequality by ordinary people (Barr & Miller, 2020;Chambers et al, 2014;Engel et al, 2020;Gimpelson & Treisman, 2018;Kiatpongsan & Norton, 2014;Kuziemko et al, 2017;Martinangeli, 2021). This research has mostly focused on CEOworker pay ratios as a driver of people's perceptions of inequality (Benedetti & Chen, 2018;Kiatpongsan & Norton, 2014;Mohan et al, 2018).…”

Regional Variation in Tax Compliance and the Role of Culture

“…This procedure-which closely follows prior lab experiments analyzing the role of culture in tax compliance (e.g., Zhang et al, 2016;Guerra & Harrington, 2018;Ottone et al, 2018)-is meant to ensure confidentiality and mitigate the influence of conditional cooperation, reputation, reciprocity, or wealth effects, all of which lie beyond the scope of this research. 6 5 As in other tax compliance experiments, we put the (risk elicitation) task after the main (tax compliance) game to ensure that participants' behavior in the main game was not contaminated by any expectations nor outcomes possibly formed during the task (Heinemann & Kocher, 2013;Tan & Yim, 2014;Casal et al, 2016;Choo et al, 2016;Bruner et al, 2017;Bernasconi & Bernhofer, 2020;Engel et al, 2020). Participants were not aware of the existence of the task beforehand: they were informed that the experiment consisted of multiple parts, but the instructions for the task were handed out only after the completion of the main game.…”