Skip to main content
×
×
Home

Happy taxation: increasing tax compliance through positive rewards?

  • Hilke Brockmann (a1), Philipp Genschel (a2) and Laura Seelkopf (a3)
Abstract

Can governments increase tax compliance by rewarding honest taxpayers? We conducted a controlled laboratory experiment comparing tax compliance under a “deterrence” baseline with tax compliance under two “reward” treatments: a “donation” treatment giving taxpayers a say in the spending purposes of their payments and a “lucky” treatment giving taxpayers the (highly unlikely) chance of winning a lottery. The reward treatments significantly affected tax behaviour but not in a straightforward manner. Although female participants altered their behaviour as expected and complied somewhat more, men strongly reacted in the opposite manner: they evaded a much higher percentage of taxes than under the baseline. Apparently, there is no one-size-fits-all approach to boost tax compliance.

Copyright
References
Hide All
Alesina, A., Ichino, A. and Karabarbounis, L. (2011) Gender Based Taxation and the Allocation of Family Chores. American Economic Journals: Economic Policy 3: 140.
Ali, M., Fjeldstad, O.-H. and Sjursen, I. H. (2014) To Pay or Not to Pay? Citizens’ Attitudes Toward Taxation in Kenya, Tanzania, Uganda, and South Africa. World Development 64: 828842.
Allingham, M. G. and Sandmo, A. (1972) Income Tax Evasion: A Theoretical Analysis. Journal of Public Economics 1: 323338.
Alm, J. (2011) Measuring, Explaining, and Controlling Tax Evasion: Lessons from Theory, Experiments, and Field Studies. International Tax and Public Finance 19(1): 5477.
Alm, J., Bloomquist, K. M. and McKee, M. (2015) On the External Validity of Laboratory Tax Compliance Experiments. Economic Inquiry 53(2): 11701186.
Alm, J., Cherry, T., Jones, M. and McKee, M. (2010) Taxpayer Information Assistance Services and Tax Compliance Behavior. Journal of Economic Psychology 31: 577586.
Alm, J., Jackson, B. R. and McKee, M. (1992) Deterrence and Beyond: Toward a Kinder, Gentler IRS. In Slemrod J. (ed.), Why People Pay Taxes. Ann Arbor, MI: University of Michigan Press, 311329.
Alm, J., Jackson, B. R. and McKee, M. (1993) Fiscal Exchange, Collective Decision Institutions, and Tax Compliance. Journal of Economic Behavior and Organization 22: 285303.
Alm, J. and Torgler, B. (2011) Do Ethics Matter? Tax Compliance and Morality. Journal of Business Ethics 101: 635651.
Andreoni, J. (1990) Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving. The Economic Journal 100(401): 464477.
Andreoni, J. and Vesterlund, L. (2001) Which is the Fair Sex? Gender Differences in Altruism. The Quarterly Journal of Economics 116(1): 293312.
Ariyabuddhiphongs, V. (2011) Lottery Gambling: A Review. Journal of Gambling Studies 27(1): 1533.
Barnes, G. M., Welte, J. W., Tidwell, M.-C. O. and Hoffman, J. H. (2011) Gambling on the Lottery: Sociodemographic Correlates Across the Lifespan. Journal of Gambling Studies 27(4): 575586.
Casey, E. (2008) Working Class Women, Gambling and the Dream of Happiness. Feminist Review 89: 122137.
Chung, J. and Trivedi, V. U. (2003) The Effect of Friendly Persuasion and Gender on Tax Compliance Behavior. Journal of Business Ethics 47(2): 133145.
Croson, R. and Gneezy, U. (2009) Gender Differences in Preferences. Journal of Economic Literature 47(2): 448474.
Cummings, R. G., Martinez-Vazquez, J., McKee, M. and Torgler, B. (2009) Tax Morale Affects Tax Compliance: Evidence from Surveys and an Artefactual Field Experiment. Journal of Economic Behavior and Organization 70: 447457.
Druckman, J. N. and Kam, C. (2011) Students as Experimental Participants: A Defense of the “Narrow Data Base”. In Druckman J. N., Green D. P., Kuklinski J. H. and Lupia A. (eds.), Cambridge Handbook of Experimental Political Science. New York, NY: Cambridge University Press, 4157.
Eckel, C. C. and Grossman, P. J. (1996) The Relative Price of Fairness: Gender Differences in a Punishment Game. Journal of Economic Behavior & Organization 30(2): 143158.
European Research Network on Philanthropy (n.d.) Spain, http://ernop.eu/countries/spain/ (accessed 27 April 2015).
Feld, L. P. and Frey, B. S. (2007) Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation. Law & Policy 29(1): 102120.
Feld, L. P., Frey, B. S. and Torgler, B. (2006) Rewarding Honest Taxpayers? In Elffers H., Verboon P. and Huisman W. (eds.), Managing and Maintaining Compliance. Den Haag: Boom Legal Publishers, 4561.
Fooken, J., Hemmelgarn, T. and Herrmann, B. (2014) Improving VAT Compliance – Random Awards for Tax Compliance. European Commission Taxation Papers Working Paper No. 51-2014, European Commission, Brussels.
Frey, B. S., Benz, M. and Stutzer, A. (2004) Introducing Procedural Utility: Not Only What, But Also How Matters. Journal of Institutional and Theoretical Economics 160(3): 377401.
Frey, B. S. and Jegen, R. (2001) Motivation Crowding Theory. Journal of Economic Surveys 15(5): 589611.
Friedland, N., Maital, S. and Rutenberg, A. (1978) A Simulation Study of Income Tax Evasion. Journal of Public Economics 10: 107116.
Gilligan, C. (1982) In a Different Voice: Psychological Theory and Women’s Development. Cambridge, MA: Harvard University Press.
Harbaugh, W. T., Mayr, U. and Burghart, D. (2007) Neural Responses to Taxation and Voluntary Giving Reveal Motives for Charitable Donations. Science 316(5831): 16221625.
Hasseldine, J. and Hite, P. A. (2003) Framing, Gender and Tax Compliance. Journal of Economic Psychology 24: 517533.
John, P., Cotterill, S., Richardson, L., Moseley, A., Stoker, G., Wales, C. and Smith, G. (2013) Nudge, Nudge, Think, Think. Experimenting with Ways to Change Civic Behaviour. London: Bloomsbury Academic.
Karlan, D. and List, J. A. (2007) Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment. American Economic Review 97(5): 17741793.
Kastlunger, B., Dressler, S. G., Kirchler, E., Mittone, L. and Voracek, M. (2010) Sex Differences in Tax Compliance: Differentiating Between Demographic Sex, Gender-Role Orientation and Prenational Masculinization (2D:4D). Journal of Economic Psychology 31(4): 542552.
Kinsey, K. A. (1992) Deterrence and Alienation Effects of IRS Enforcement: An Analysis of Survey Data. In Slemrod J. (ed.), Why People Pay Taxes: Tax Compliance and Enforcement. Ann Arbor: University of Michigan Press, 259285.
Kirchler, E., Hoelzl, E. and Wahl, I. (2008) Enforced Versus Voluntary Tax Compliance: The “Slippery Slope” Framework. Journal of Economic Psychology 29(2): 210225.
Lamberton, C., De Neve, J.-E. and Norton, M. I. (2014) Eliciting Taxpayer Preferences Increases Tax Compliance. Harvard Business School Working Paper No. 14-106, Harvard Business School, Cambridge.
Martin, S. and Dolan, P. (2010) Dear Taxpayer, Congratulations! You’ve Won Your Money Back, Harvard Business Review, https://hbr.org/2010/12/dear-mr-taxpayer-congratulatio (accessed 27 April 2015).
McDermott, R. (2002) Experimental Methodology in Political Science. Political Analysis 10(4): 325342.
Meier, S. and Stutzer, A. (2008) Is Volunteering Rewarding in Itself? Economica 75(297): 3959.
Murphy, R. (2012) Closing the European Tax Gap. A Report for Group of the Progressive Alliance of Socialists & Democrats in the European Parliament. Norfolk, VA: Tax Research LLP.
Niederle, M. and Vesterlund, L. (2007) Do Women Shy Away from Competition? Do Men Compete Too Much? Quarterly Journal of Economics 122(3): 10671101.
Perez, L. and Humphreys, B. (2013) The “Who and Why” of Lottery: Empirical Highlights from the Seminal Economic Literature. Journal of Economic Surveys 27(5): 915940.
Seely, A. (2011) Hypothecated Taxation – Commons Library Standard Note, 2011, UK Parliament, http://www.parliament.uk/business/publications/research/briefing-papers/SN01480/hypothecated-taxation (accessed 29 April 2015).
Spicer, M. W. and Becker, L. A. (1980) Fiscal Inequity and Tax Evasion: An Experimental Approach. National Tax Journal 33(2): 171175.
Steinmo, S. (1993) Taxation and Democracy: Swedish, British and American Approaches to Financing the Modern State. New Haven, CT: Yale University Press.
Stotsky, J. G. (1997) How Tax Systems Treat Men and Women Differently. Finance & Development 34(1): 3033.
Sussman, A. B. and Olivola, C. Y. (2011) Axe the Tax: Taxes are Disliked More than Equivalent Costs. Journal of Marketing Research 48(SPL): S91S101.
Svallfors, S. (2013) Government Quality, Egalitarianism, and Attitudes to Taxes and Social Spending: A European Comparison. European Political Science Review 5(3): 363380.
The Economist (2015) Hometown Dues, The Economist, 18 April.
Tilly, C. (2009) Extraction and Democracy. In Martin I. W., Mehrotra A. K. and Prasad M. (eds.), The New Fiscal Sociology. Taxation in Comparative and Historical Perspective. New York, NY: Cambridge University Press, 173182.
Timmons, J. F. and Garfias, F. (2015) Revealed Corruption, Taxation, and Fiscal Accountability: Evidence from Brazil. World Development 70: 1327.
Torgler, B. (2002) Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments. Journal of Economic Surveys 16(5): 657683.
Torgler, B. (2005) Tax Morale and Direct Democracy. European Journal of Political Economy 21: 525531.
Torgler, B. (2006) The Importance of Faith: Tax Morale and Religiosity. Journal of Economic Behavior & Organization 61(1): 81109.
Torgler, B. and Schneider, F. (2007) What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries. Social Science Quarterly 88(2): 443470.
UNDP (2010) Gender Equality and Poverty Reduction: Taxation. UNDP Issues Brief 1, UNDP, New York.
van Dijke, M. and Verboon, P. (2010) Trust in Authorities as a Boundary Condition to Procedural Fairness Effects on Tax Compliance. Journal of Economic Psychology 31: 8091.
Wahl, I., Muehlbacher, S. and Kirchler, E. (2010) The Impact of Voting on Tax Payments. Kyklos 63(1): 144158.
Wan, J. (2010) The Incentive to Declare Taxes and Tax Revenue: The Lottery Receipt Experiment in China. Review of Development Economics 14(3): 611624.
Wood, R. W. (2011) What’s Your IRS Audit Risk?, Forbes.
Alm, J., Cherry, T., Jones, M. and McKee, M. (2010) Taxpayer Information Assistance Services and Tax Compliance Behavior. Journal of Economic Psychology 31: 577586.
Alm, J., Jackson, B. R. and McKee, M. (1993) Fiscal Exchange, Collective Decision Institutions, and Tax Compliance. Journal of Economic Behavior and Organization 22: 285303.
Alm, J. and McKee, M. (2004) Tax Compliance as a Coordination Game. Journal of Economic Behavior and Organization 54: 297312.
Alm, J., Sanchez, I. and de Juan, A. (1995) Economic and Noneconomic Factors in Tax Compliance. Kyklos 48(1): 318.
Bayer, R.-C. and Sutter, M. (2009) The Excess Burden of Tax Evasion – An Experimental Detection-Concealment Contest. European Economic Review 53(5): 527543.
Bosco, L. and Mittone, L. (1997) Tax Evasion and Moral Constraints: Some Experimental Evidence. Kyklos 50(3): 297324.
Cadsby, C. B., Maynes, E. and Trivedi, V. U. (2006) Tax Compliance and Obedience to Authority at Home and in the Lab: A New Experimental Approach. Experimental Economics 9: 343359.
Casey, J. T. and Scholz, J. T. (1991) Beyond Deterrence: Behavioral Decision Theory and Tax Compliance. Law and Society Review 25(4): 821843.
Chung, J. and Trivedi, V. U. (2003) The Effect of Friendly Persuasion and Gender on Tax Compliance Behavior. Journal of Business Ethics 47(2): 133145.
Coricelli, G., Joffily, M., Montmarquette, C. and Villeval, M. C. (2010) Cheating, Emotions, and Rationality: An Experiment on Tax Evasion. Experimental Economics 13: 226247.
Cummings, R. G., Martinez-Vazquez, J., McKee, M. and Torgler, B. (2009) Tax Morale Affects Tax Compliance: Evidence from Surveys and an Artefactual Field Experiment. Journal of Economic Behavior and Organization 70: 447457.
Gërxhani, K. and Schram, A. (2006) Tax Evasion and Income Source: A Comparative Experimental Study. Journal of Economic Psychology 27: 402422.
Guth, W., Levati, M. V. and Sausgruber, R. (2005) Tax Morale and (De-)Centralization: An Experimental Study. Public Choice 125: 171188.
Hasseldine, J. and Hite, P. A. (2003) Framing, Gender and Tax Compliance. Journal of Economic Psychology 24: 517533.
Heinemann, F. and Kocher, M. G. (2010) Tax Compliance Under Tax Regime Changes(10-020), Technical Report, Centre for European Economic Research.
Kastlunger, B., Dressler, S. G., Kirchler, E., Mittone, L. and Voracek, M. (2010) Sex Differences in Tax Compliance: Differentiating Between Demographic Sex, Gender-Role Orientation, and Prenatal Masculinization (2D:4D). Journal of Economic Psychology 31: 542552.
Kastlunger, B., Kirchler, E., Mittone, L. and Pitters, J. (2009) Sequences of Audits, Tax Compliance, and Taxpaying Strategies. Journal of Economic Psychology 30: 405418.
Kirchler, E., Muehlbacher, S., Hoelzl, E. and Webley, P. (2009) Effort and Aspirations in Tax Evasion: Experimental Evidence. Applied Psychophysiology: An International Review 58(3): 488507.
Maciejovsky, B., Kirchler, E. and Schwarzenberger, H. (2007) Misperception of Chance and Loss Repair: On the Dynamics of Tax Compliance. Journal of Economic Psychology 28: 678691.
Spicer, M. and Hero, R. (1985) Tax Evasion and Heuristics. Journal of Public Economics 26: 263267.
Spicer, M. W. and Becker, L. A. (1980) Fiscal Inequity and Tax Evasion: An Experimental Approach. National Tax Journal 33(2): 171175.
Trivedi, V. U., Shehata, M. and Lynn, B. (2003) Impact of Personal and Situational Factors on Taxpayer Compliance: An Experimental Analysis. Journal of Business Ethics 47(3): 175197.
van Dijke, M. and Verboon, P. (2010) Trust in Authorities as a Boundary Condition to Procedural Fairness Effects on Tax Compliance. Journal of Economic Psychology 31: 8091.
Wahl, I., Kastlunger, B. and Kirchler, E. (2010a) Trust in Authorities and Power to Enforce Tax Compliance: An Empirical Analysis of the “Slippery Slope Framework”. Law and Policy 32(4): 383406.
Wahl, I., Muehlbacher, S. and Kirchler, E. (2010b) The Impact of Voting on Tax Payments. Kyklos 63(1): 144158.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Public Policy
  • ISSN: 0143-814X
  • EISSN: 1469-7815
  • URL: /core/journals/journal-of-public-policy
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed