Declaring income versus declaring taxes in tax compliance experiments: Does the design of laboratory experiments affect the results?

Muehlbacher, StephanORCID: https://orcid.org/0000-0002-3665-4976; Hartmann, Andre; Kirchler, ErichORCID: https://orcid.org/0000-0003-4731-1650 and Alm, James (2023) Declaring income versus declaring taxes in tax compliance experiments: Does the design of laboratory experiments affect the results? Economic and Political Studies, 11 (3), pp. 334-349. DOI: 10.1080/20954816.2022.2121244

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Abstract

Laboratory experiments are frequently criticised, in part because of the sensitivity of the results to specific features of the design. This paper addresses an important question regarding the key aspect of the experimental environment: How should the dependent variable – participants’ choices – be operationalised? For the specific context of laboratory research on income tax compliance, we compare the effects of the two most common operationalisation types: the declaration of gross income versus the declaration of tax payment. It is found that compliance is higher when participants indicate their tax payment than when they declare their income. It is also discovered that the effects of the three policy parameters of the economic model (the tax rate, audit probability and fine rate) are stronger when participants declare their taxes than when they declare their income. These results are relevant for interpreting prior and future experimental evidence on tax compliance and can explain some contradictory previous findings. More broadly, this study suggests that the results of laboratory experiments may depend on specific features of the experimental design, which proposes a strong need for more systematic methodological research.

Item Type: Article in Academic Journal
Keywords: Laboratory experiments, experimental design, tax compliance, tax rate, audit probability, fine rate
Funders: This work was supported by Verein zur Förderung der Wirtschaftspsychologie and Universität Wien
Research Units: Current Research Groups > Behavioral Economics
Date Deposited: 21 Feb 2024 14:59
Last Modified: 21 Feb 2024 14:59
DOI: 10.1080/20954816.2022.2121244
ISSN: 2095-4816
URI: https://irihs.ihs.ac.at/id/eprint/6912

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