The Impact of Tax Knowledge and Budget Spending Influence on Tax Compliance

Djawadi, Behnud Mir; Fahr, René

doi:10.2139/ssrn.2234277

Cited by 13 publications

(14 citation statements)

References 42 publications

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“…As in other similar studies (e.g., Djawadi and Fahr, 2013), we found that compliance is also sustained by increasing procedural justice. When participants have the opportunity of a direct participation into the rules of the tax system (they have voice on distribution), tax evasion is lower.…”

Section: Discussionsupporting

confidence: 91%

“…In addition to the mentioned studies, other works have recently contributed to understanding the impact of trust and knowledge on tax compliance by experimentally manipulating taxpayers' power in deciding about government budget spending (cf. Djawadi and Fahr, 2013;Abbiati, Antinyan and Corazzini, 2014;Lamberton, De Neve and Norton, 2014).…”

Section: Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Tax compliance depends on voice of taxpayers

Casal

Kogler

Mittone

et al. 2016

Journal of Economic Psychology

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Section: Discussionsupporting

confidence: 91%

Section: Related Literaturementioning

confidence: 99%

Tax compliance depends on voice of taxpayers

Casal

Kogler

Mittone

et al. 2016

Journal of Economic Psychology

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“…Treatment 5 -National pride The evidence on the effectiveness of invoking national pride is mixed: there are examples where such messaging has been used successfully to increase tax compliance in the lab (Gangl et al, 2016;Macintyre et al, 2021); by contrast, in an experiment in Guatemala, the appeal to the taxpayers' national identity was less effective at increasing tax compliance than a social norms message and one framing noncompliance as a deliberate choice (Kettle et al, 2016). On the other hand, transparency about how tax revenue is spent can positively influence tax compliance (Djawadi and Fahr, 2013).…”

Section: Treatment 4 -Combined Guidance and Planning Promptmentioning

confidence: 99%

Behavioural prompts to increase early filing of tax returns: a population-level randomised controlled trial of 11.2 million taxpayers in Indonesia

Persian

Prastuti²,

Adityawarman³

et al. 2022

Behav. Public Policy

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In Indonesia, as in other countries, a large proportion of tax returns are filed at the last minute. In a population-wide randomised controlled trial (n = 11,157,069), we evaluated the impact of behavioural email prompts on the proportion of annual tax returns filed at least two weeks before the deadline; and overall filing rate. In two control conditions, taxpayers either received no email or an email used in prior years, emphasising regulatory information. The five treatments informed by behavioural science were (1) a simplified version of the existing email, emphasising early filing; (2) the simplified version with additional guidance on filing taxes; (3) the simplified version with a planning prompt and option to sign up for email reminders; (4) a version combining treatments 1, 2 and 3; and (5) an email appealing to national pride. Compared to the no-email control, all emails led to a statistically significant increase in early and overall filing rates. The planning email (3) was the most effective, increasing early filling from 34.9% to 37% (b 2.07 percentage points (pp), p < 0.001, 95% confidence interval (CI) 1.97–2.17pp), and overall filing from 65.6% to 66.7% (b 1.10pp, p < 0.001, 95% CI 0.99–1.19pp).

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“…Provision of information on the uses and benefits of taxation thus increases tax compliance (Sussman and Olivola, 2011; Djawadi and Fahr, 2013). There is not much literature however on how feelings of empathy, triggered by the information provided on how taxpayers' money is spent on the less privileged, could be driving these higher compliance rates.…”

Section: Theoretical Framework and Derivation Of Hypothesesmentioning

confidence: 99%

How can tax compliance be incentivized? An experimental examination of voice and empathy

AbdelNabi

Wanas²,

Mansour

2021

REPS

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PurposeTax evasion is an economic crime that nearly all world countries suffer from. Its consequences are countless, including poor public spending on infrastructure projects and social welfare programs, low economic growth and development, institutional mistrust and fiscal deficits. For developing countries in particular, targeting development programs and infrastructural investments requires an efficient tax collection policy to generate sufficient funds for such purposes. This makes the tax evasion problem a critical one and countering it extremely policy relevant. Based on evidence that shows how the understanding of taxpayers' behavior is an essential factor in fighting evasion, this paper aims to test different factors that might incentivize citizens using a behavioral and experimental approach, in non-Western educated industrialized rich democracies (non-WEIRD) countries, to comply more.Design/methodology/approachThis paper uses a survey experiment to examine the impact of different behavioral primes on tax compliance behavior. Specifically, it observes subjects' compliance behavior in two contexts: voice and empathy. A total of 273 students from a big public university in Egypt were randomly selected to participate in this study.FindingsIn the “Voice” treatment, the explanatory variable (VOICE) was found statistically significant, thus confirming the hypothesis that democracy, through having a voice in the decision-making process, affects compliance positively. As for the “Empathy” treatment, the explanatory variable (EMPATHY) was also found significant. This confirms the second hypothesis that triggering feelings of empathy, through highlighting the good cause behind public spending that uses taxpayers' money, affects compliance behavior positively.Research limitations/implicationsDespite the fact that the experimental methodology is a methodology with high internal validity, examining the impact of a specific intervention on behavior, a replication of the experiment in other contexts might be useful in increasing the external validity of the findings. Specifically, conducting this experiment on a nonstudent sample might lead to even more powerful results by increasing the ecological validity of the results.Practical implicationsThis study advocates a more behaviorally informed public policy. Specifically, Egyptian policymakers are recommended to adopt behavioral nudges as a complement to existing policies. The authors believe the findings, if confirmed by repeated experiments (lab, lab-in-the-field and rational choice theories on both student and non-student samples) in a number of Arab countries, might also help in offering cost-effective nudges for the Arab world policymakers, where culture and the political context are to a great extent similar.Social implicationsThe findings of the study have a number of social implications. Higher tax compliance will enable higher levels of public spending on a number of social targets such as education, health and welfare programs.Originality/valueWhile the study builds on recent research examining how to incentivize tax compliance, it simultaneously seeks to make three contributions. First, the study design aims to apply recent advances in behavioral sciences (impact of voice and empathy) in a policy area that has not seen much use of such interventions in the Egyptian context (i.e. tax compliance). Second, the study is policy relevant in the sense that it aims to increase the effectiveness of existing government policies by complementing them with behavioral primes. Third, there is nearly no literature found applying this topic in a non-WEIRD country such as Egypt.

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The Impact of Tax Knowledge and Budget Spending Influence on Tax Compliance

Cited by 13 publications

References 42 publications

Tax compliance depends on voice of taxpayers

Tax compliance depends on voice of taxpayers

Behavioural prompts to increase early filing of tax returns: a population-level randomised controlled trial of 11.2 million taxpayers in Indonesia

How can tax compliance be incentivized? An experimental examination of voice and empathy

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