Hostname: page-component-76fb5796d-r6qrq Total loading time: 0 Render date: 2024-04-25T11:32:07.572Z Has data issue: false hasContentIssue false
  • English
  • Français

Tax compliance and social desirability bias of taxpayers: experimental evidence from Indonesia

Published online by Cambridge University Press:  17 May 2021

Endra Iraman Open the ORCID record for Endra Iraman [Opens in a new window] ,
Yoshikuni Ono  and
Makoto Kakinaka
Endra Iraman*
Affiliation:
Graduate School for International Development and Cooperation, Hiroshima University, 1-5-1 Kagamiyama, Higashi-Hiroshima, Hiroshima739-8529, Japan
Yoshikuni Ono
Affiliation:
Faculty of Political Science and Economics, Waseda University, 1-6-1 Nishiwaseda Shinjuku-ku, Tokyo169-8050, Japan
Makoto Kakinaka
Affiliation:
Graduate School for International Development and Cooperation, Hiroshima University, 1-5-1 Kagamiyama, Higashi-Hiroshima, Hiroshima739-8529, Japan
*
*Corresponding author. E-mail: endraira0576@gmail.com
Get access Rights & Permissions [Opens in a new window]

Abstract

Identifying taxpayers who engage in noncompliant behaviour is crucial for tax authorities to determine appropriate taxation schemes. However, because taxpayers have an incentive to conceal their true income, it is difficult for tax authorities to uncover such behaviour (social desirability bias). Our study mitigates the bias in responses to sensitive questions by employing the list experiment technique, which allows us to identify the characteristics of taxpayers who engage in tax evasion. Using a dataset obtained from a tax office in Jakarta, Indonesia, we conducted a computer-assisted telephone interviewing survey in 2019. Our results revealed that 13% of the taxpayers, old, male, corporate employees, and members of a certain ethnic group had reported lower income than their true income on their tax returns. These findings suggest that our research design can be a useful tool for understanding tax evasion and for developing effective taxation schemes that promote tax compliance.

Keywords

list experimentsocial desirability biassurveytax compliancetax evasion
Type
Research Article
Information
Journal of Public Policy , Volume 42 , Issue 1 , March 2022 , pp. 92 - 109
Copyright
© The Author(s), 2021. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ahlquist, JS (2018) List Experiment Design, Non-Strategic Respondent Error, and Item Count Technique Estimators. Political Analysis, 26(1): 34–53.CrossRefGoogle Scholar
Ali, M, Fjeldstad, O, and Sjursen, IH (2014) To Pay or not to Pay? Citizens’ Attitudes toward Taxation in Kenya, Tanzania, Uganda, and South Africa. World Development, 64, 828–842.CrossRefGoogle Scholar
Allingham, M and Sandmo, A (1972) Income Tax Evasion: A Theoretical Analysis. Journal of Public Economics, 1, 323–338.CrossRefGoogle Scholar
Alm, J (2012) Measuring, Explaining, and Controlling Tax Evasion: Lessons from Theory, Experiments, and Field Studies. International Tax and Public Finance, 19(1): 54–77.CrossRefGoogle Scholar
Alm, J, Bloomquist, KM, and Mckee, M (2017) When You Know Your Neighbor Pays Taxes: Information, Peer Effects, and Tax Compliance. Fiscal Studies, 38(4): 587–613.CrossRefGoogle Scholar
Alm, J, McClelland, GH, and Schulze, WD (1992) Why do People Pay Taxes? Journal of Public Economics, 48, 21–38.CrossRefGoogle Scholar
Alm, J and Torgler, B (2006) Culture Differences and Tax Morale in the United States and in Europe. Journal of Economic Psychology, 27, 224–246.CrossRefGoogle Scholar
Anderson, GM and Tollison, RD (1992) Morality and Monopoly: The Constitutional Political Economy of Religious Rules. Cato Journal, 13, 373–391.Google Scholar
Andreoni, J, Erard, B, and Feinstein, J (1998) Tax Compliance. Journal of Economic Literature, 36(2): 818–860.Google Scholar
Barber, BM and Odean, T (2001) Boys will be Boys: Gender, Overconfidence, and Common Stock Investment. The Quarterly Journal of Economics, 116(1): 261–292.CrossRefGoogle Scholar
Batrancea, L, Nichita, A, Olsen, J, Kogler, C, Kirchler, E, Hoelzl, E, Weiss, A, Torgler, B, Fooken, J, Fuller, J, Schaffner, M, Banuri, S, Hassanein, M, Alarcon-Garcia, G, Aldemir, C, Apostol, O, Weinberg, DB, Batrancea, I, Belianin, A, Gomez, FJB, Briguglio, M, Dermol, V, Doyle, E, Gcabo, R, Gong, B, Ennya, S, Essel-Anderson, A, Frecknall-Hughes, J, Hasanain, A, Hizen, Y, Huber, O, Kaplanoglou, G, Kudla, J, Lemoine, JE, Leurcharusmee, S, Matthiasson, T, Mehta, S, Min, S, Naufal, G, Niskanen, M, Nordblom, K, Ozturk, EB, Pacheco, L, Pantya, J, Rapanos, V, Roland-Levy, C, Roux-Cesar, AM, Salamzadeh, A, Savadori, L, Schei, V, Sharma, M, Summers, B, Suriya, K, Tran, Q, Villegas-Palacio, C, Visser, M, Xia, C, Yi, S, and Zukauskas, S (2019) Trust and Power as Determinants of Tax Compliance Across 44 Nations. Journal of Economic Psychology, 74, 1–15.CrossRefGoogle Scholar
Betz, M, O’Connell, L, and Shepard, JM (1989) Gender Differences in Proclivity for Unethical Behavior. Journal of Business Ethics, 8, 321–324.CrossRefGoogle Scholar
Biddle, N, Fels, KM, and Sinning, M (2018) Behavioral Insights on Business Taxation: Evidence from Two Natural Field Experiments. Journal of Behavioral and Experimental Finance, 18, 30–39.CrossRefGoogle Scholar
Blair, G and Imai, K (2012) Statistical Analysis of List Experiments. Political Analysis, 20(1): 47–77.CrossRefGoogle Scholar
Brockmann, H, Genschel, P, Seelkopf, L (2016) Happy Taxation: Increasing Tax Compliance through Positive Reward. Journal of Public Policy, 36(3): 381–406.CrossRefGoogle Scholar
Burden, BC, Ono, Y, and Yamada, M (2017) Reassessing Public Support for a Female President. The Journal of Politics, 79(3): 1073–1078.CrossRefGoogle Scholar
Carrillo, P, Pomeranz, D, and Singhal, M (2017) Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement. American Economic Journal: Applied Economics, 9(2): 144–164.Google Scholar
Christian, RC and Alm, J (2014) Empathy, Sympathy, and Tax Compliance. Journal of Economic Psychology, 40, 62–82.CrossRefGoogle Scholar
Chung, J and Trivedi, V (2003) The Effect of Friendly Persuasion and Gender on Tax Compliance Behavior. Journal of Business Ethics, 47, 133–145.CrossRefGoogle Scholar
Cobham, A and Jansky, P (2018) Global Distribution of Revenue Loss from Corporate Tax Avoidance: Re-estimation and Country Results. Journal of International Development, 30, 206–232.CrossRefGoogle Scholar
Corstange, D (2009) Sensitive Questions, Truthful Answer? Modeling the List Experiment with LISTIT. Political Analysis, 17, 45–63.CrossRefGoogle Scholar
Crivelli, E, Mooij, RD, and Keen, M (2016) Base Erosion, Profit Shifting, and Developing Countries. FinanzArchiv: Public Finance Analysis, 72(3): 268–301.CrossRefGoogle Scholar
D’Attoma, J (2020) More Bang for Your Buck: Tax Compliance in the United States and Italy. Journal of Public Policy, 40, 1–24.CrossRefGoogle Scholar
Dunn, P, Farrar, J, and Hausserman, C (2018) The Influence of Guilt Cognitions on Taxpayers’ Voluntary Disclosures. Journal of Business Ethics, 148(3): 689–701.CrossRefGoogle Scholar
Durham, Y, Manly, TS, and Ritsema, C (2014) The Effects of Income Source, Context, and Income Level on Tax Compliance Decisions in a Dynamic Experiment. Journal of Economic Psychology, 40, 220–233.CrossRefGoogle Scholar
Fochmann, M and Kroll, EB (2016) The Effects of Rewards on Tax Compliance Decisions. Journal of Economic Psychology, 52, 38–55.CrossRefGoogle Scholar
Glynn, AN (2013) What Can We Learn with Statistical Truth Serum? Design and Analysis of the List Experiment. Public Opinion Quarterly, 77, 159–172.CrossRefGoogle Scholar
Gonzalez-Ocantos, E, Jonge, CKD, Meléndez, C, Osorio, J, and Nickerson, DW (2012) Vote Buying and Social Desirability Bias: Experimental Evidence from Nicaragua. American Journal of Political Science, 56(1): 202–217.CrossRefGoogle Scholar
Hallsworth, M (2014) The Use of Field Experiments to Increase Tax Compliance. Oxford Review of Economic Policy, 30(4): 658–679.CrossRefGoogle Scholar
Hasseldine, J (1999) Gender Differences in Tax Compliance. Asia-Pacific Journal of Taxation, 3, 73–89.Google Scholar
Hasseldine, J and Hite, PA (2003) Framing, Gender, and Tax Compliance. Journal of Economic Psychology, 24(4): 517–533.CrossRefGoogle Scholar
Hofmann, E, Voracek, M, Bock, C, and Kirchler, E (2017) Tax Compliance across Sociodemographic Categories: Meta-Analyses of Survey Studies in 111 Countries. Journal of Economic Psychology, 62, 63–71.CrossRefGoogle Scholar
Holbrook, AL and Krosnick, JA (2010) Social Desirability Bias in Voter Turnout Reports: Tests Using the Item Count Technique. Public Opinion Quarterly, 74(1): 37–67.CrossRefGoogle Scholar
Imai, K (2011) Multivariate Regression Analysis for the Item Count Technique. Journal of the American Statistical Association, 106(494): 407–416.CrossRefGoogle Scholar
Jimenez, P and Iyer, GS (2016) Tax Compliance in a Social Setting: The Influence of Social Norms, Trust in Government, and Perceived Fairness on Taxpayer Compliance. Advances in Accounting, 34, 17–26.CrossRefGoogle Scholar
Kastlunger, B, Dressler, SG, 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, 542–552.CrossRefGoogle Scholar
Kirchler, E (2007) The Economic Psychology of Tax Behavior. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
Kirchler, E, Hoelzl, E, and Wahl, I (2008) Enforced versus Voluntary Tax Compliance: The “Slippery Slope” Framework. Journal of Economic Psychology, 29(2): 210–225.CrossRefGoogle Scholar
Kogler, C, Batrancea, L, Nichita, A, Pantya, J, Belianin, A, and Kirchler, E (2013) Trust and Power as Determinants of Tax Compliance: Testing the Assumptions of the Slippery Slope Framework in Austria, Hungary, Romania, and Russia. Journal of Economic Psychology, 34, 169–180.CrossRefGoogle Scholar
Korndörfer, M, Krumpal, I, and Schmukle, SC (2014) Measuring and Explaining Tax Evasion: Improving Self-Reports Using the Crosswise Model. Journal of Economic Psychology, 45, 18–32.CrossRefGoogle Scholar
Kountouris, Y and Remoundou, K (2013) Is there a Cultural Component in Tax Morale? Evidence from Immigrants in Europe. Journal of Economic Behavior & Organization, 96, 103–119.CrossRefGoogle Scholar
Kreps, DM (1990) Corporate Culture and Economic Theory. In Alt, James E. and Shepsle, Kenneth A. (eds.), Perspectives on Positive Political Economy, New York, NY: Cambridge University Press, 90–121.CrossRefGoogle Scholar
Lago-Penas, I and Lago-Penas, S (2010) The Determinants of Tax Morale in Comparative Perspective: Evidence from European Countries. European Journal of Political Economy, 26, 441–463.CrossRefGoogle Scholar
Lax, JR, Phillips, JH, and Stollwerk, AF (2016) Are Survey Respondents Lying about Their Support for Same-Sex Marriage? Lessons from a List Experiment. Public Opinion Quarterly, 80(2): 510–533.CrossRefGoogle ScholarPubMed
Lubian, D and Zarri, L (2011) Happiness and Tax Morale: An Empirical Analysis. Journal of Economic Behavior & Organization, 80(1): 223–243.CrossRefGoogle Scholar
Mascagni, G (2018) From the Lab to the Field: A Review of Tax Experiments. Journal of Economic Surveys, 32(2): 273–301.CrossRefGoogle Scholar
Mueller, DS (2001) Centralism, Federalism, and the Nature of Individual Preferences. Constitutional Political Economy, 12, 161–172.CrossRefGoogle Scholar
Nuno, A and John, FA (2015) How to Ask Sensitive Questions in Conservation: A Review of Specialized Questioning Techniques. Biological Conservation, 189, 5–15.CrossRefGoogle Scholar
Pomeranz, D (2015) No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax. American Economic Review, 105(8): 2539–2569.CrossRefGoogle Scholar
Randrianantoandro, TN, Kono, H, and Kubota, S (2015) Knowledge and Behavior in an Animal Disease Outbreak – Evidence from the Item Count Technique in a Case of African Swine Fever in Madagascar. Preventive Veterinary Medicine, 118(4): 483–487.CrossRefGoogle Scholar
Rincke, J and Traxler, C (2011) Enforcement Spillovers. The Review of Economics and Statistics, 93(4): 1224–1234.CrossRefGoogle Scholar
Russo, FF (2013) Tax Morale and Tax Evasion Reports. Economics Letters, 121(1): 110–114.CrossRefGoogle Scholar
Scholz, JT and Lubell, M (1998) Trust and Taxpaying: Testing the Heuristic Approach to Collective Action. American Journal of Political Science, 42(2): 398–417.CrossRefGoogle Scholar
Shimeles, A, Gurara, DZ, and Woldeyes, F (2017) Taxman’s Dilemma: Coercion or Persuasion? Evidence from a Randomized Field Experiment in Ethiopia. American Economic Review, 107(5): 420–424.CrossRefGoogle Scholar
Slemrod, J (2008) Does it Matter who Writes the Check to the Government? The Economics of Tax Remittance. National Tax Journal, 61(2): 251–275.CrossRefGoogle Scholar
Torgler, B (2006) The Importance of Faith: Tax Morale and Religiosity. Journal of Economic Behavior & Organization, 61, 81–109.CrossRefGoogle Scholar
Torgler, B (2007) Tax Compliance and Tax Morale. A Theoretical and Empirical Analysis. Glos, UK: Edward Elgar Publishing.CrossRefGoogle Scholar
Torgler, B (2012) Tax Morale, Eastern Europe, and European Enlargement. Communist and Post-Communist Studies, 45, 11–25.Google Scholar
Torgler, B and Schneider, FG (2007) What Shapes Attitudes toward Paying Taxes? Evidence from Multicultural European Countries. Social Science Quarterly, 88(2): 443–470.CrossRefGoogle Scholar
Tsuchiya, T, Hirai, Y and Ono, S (2007) A Study of the Properties of the Item Count Technique. Public Opinion Quarterly, 71(2): 253–272.CrossRefGoogle Scholar
White, RD (1999) Are Women More Ethical? Recent Findings on the Effects of Gender upon Moral Development. Journal of Public Administration Research and Theory, 9(3): 459–472.CrossRefGoogle Scholar
Yaniv, G (1988) Witholding and Non-Witheld Tax Evasion. Journal of Public Economics, 35, 183–204.CrossRefGoogle Scholar
Supplementary material: Link

Iraman et al. Dataset

Dataset

https://doi.org/10.7910/DVN/QW1JXG
Link