Beyond Punishment: A Tax Compliance Experiment with Taxpayers in Costa Rica
Keywords:
tax compliance, field experiment, deterrence, moral suasion, Costa RicaAbstract
Tax compliance experiments have been conducted with students and have focused on the effects of deterrence on tax compliance. However, important insights can be gained looking at alternative instruments. A main purpose of this paper is to conduct an experiment in Costa Rica not with students (exclusively) but with taxpayers, holding traditional factors, such as the probability of penalty and the fine rate, constant and thus analysing to which extent other factors as fiscal exchange, moral suasion, and positive rewards systematically influence tax compliance. Our findings indicate that these factors increase ceteris paribus the compliance rate.Downloads
References
Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: A theoretical analysis. Journal of Public Economics, 1(3-4), 323–338. https://doi.org/10.1016/0047-2727(72)90010-2
Alm, J. (1991). A perspective on the experimental analysis of taxpayer reporting. The Accounting Review, 66(3), 577–593. https://doi.org/10.2308/tar-9605072958
Alm, J. (1998). Tax compliance and administration. University of Colorado at Boulder, Working Paper, Nº 98-12.
Alm, J., Jackson, B., & McKee, M. (1992a). Deterrence and beyond: Toward a kinder, gentler IRS. In: J. Slemrod (ed.), Why People Pay Taxes. Ann Arbor: University of Michigan Press, 311–329.
Alm, J., Jackson, B. R., & McKee, M. (1992b). ESTIMATING THE DETERMINANTS OF TAXPAYER COMPLIANCE WITH EXPERIMENTAL DATA. National Tax Journal, 45(1), 107–114. https://doi.org/10.1086/ntj41788949
Alm, J., Jackson, B. R., & McKee, M. (1992c). Institutional uncertainty and taxpayer compliance. American Economic Review, 82(4), 1018–1026.
Alm, J., McClelland, G. H., & Schulze, W. D. (1992). Why do people pay taxes? Journal of Public Economics, 48(1), 21–38. https://doi.org/10.1016/0047-2727(92)90040-m
Alm, J., McClelland, G. H., & Schulze, W. D. (1999). Changing the social norm of tax compliance by voting. Kyklos, 52(2), 141–171. https://doi.org/10.1111/j.1467-6435.1999.tb01440.x
Alm, J., & McKee, M. (2000). Tax compliance as a coordinated game. University of Colorado at Boulder. Mimeo.
Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, 36(2), 818–860.
Baldry, J. C. (1987). Income tax evasion and the tax schedule: Some experimental results. Public Finance, 42(3), 357–383.
Bardach, E. (1989). Moral suasion and taxpayer compliance. Law & Policy, 11(1), 49–69. https://doi.org/10.1111/j.1467-9930.1989.tb00020.x
Baumol, W. J., & Oates, W. E. (1979). Economics. Environmental Policy, and the Quality of Life. Englewood Cliffs, Prentice-Hall.
Becker, G. S. (1996). Accounting for tastes. Harvard University Press. https://doi.org/10.4159/9780674020658
Blumenthal, M., Christian, C., & Slemrod, J. (2001). Do normative appeals affect tax compliance? Evidence from a controlled experiment in minnesota. National Tax Journal, 54(1), 125–138. https://doi.org/10.17310/ntj.2001.1.06
Bosco, L., & Mittone, L. (1997). Tax evasion and moral constraints: Some experimental evidence. Kyklos, 50(3), 297–324. https://doi.org/10.1111/1467-6435.00018
Bowles, S. (1998). Endogenous preferences: The cultural consequences of markets and other economic institutions. Journal of Economic Literature, 36(1), 75–111.
Breton, A., & Wintrobe, R. (1978). A theory of 'Moral' suasion. The Canadian Journal of Economics, 11(2), 210–219. https://doi.org/10.2307/134345
Clotfelter, C. T. (1983). Tax evasion and tax rate: An analysis of individual return. The Review of Economics and Statistics, 65(3), 363–373.
Cooper, R. W., Dejong, D. V., Forsythe, R., & Ross, T. W. (1990). Selection criteria in coordination games: Some experimental results. American Economic Review, 80(1).
Davis, D. D., & Holt, C. A. (1993). Experimental economics. Princeton University Press. https://doi.org/10.1515/9780691233376
De Alessi, L. (1979). Toward an analysis of postdisaster cooperation. American Economic Review, 65(1), 127–138.
Elffers, H. (2000). But taxpayers do cooperate! In: M. Van Vught, M. Snyder, T. R. Tyler and Anders Biel (eds.), Cooperation in Modern Society: Promoting the Welfare of Communities, States and Organizations. London: Routledge, 184–194.
Erard, B., & Feinstein, J. S. (1994). Honesty and evasion in the tax compliance game. The RAND Journal of Economics, 25(1), 1–20. https://doi.org/10.2307/2555850
Erard, B., & Feinstein, J. S. (1994b). The role of moral sentiments and audit perceptions in tax compliance. Public Finance, 49(0), 70–89.
Falkinger, J., & Walther, H. (1991). Rewards versus penalties: On a new policy against tax evasion. Public Finance Quarterly, 19(1), 67–79. https://doi.org/10.1177/109114219101900104
Feinstein, J. S. (1991). An econometric analysis of income tax evasion and its detection. The RAND Journal of Economics, 22(1), 14–35. https://doi.org/10.2307/2601005
Feltovich, N. (2003). Critical values for the robust rank-Order test. University of Houston. Mimeo.
Frey, B. S. (1997). Not just for money: An economic theory of personal motivation. Edward Elgar Publishing.
Frey, B. S., & Kirchgässner, G. (1994). Demokratische wirtschaftspolitik: Theorie und anwendung. München, Vahlen.
Friedland, N., Maital, S., & Rutenberg, A. (1978). A simulation study of income tax evasion. Journal of Public Economics, 10(1), 107–116. https://doi.org/10.1016/0047-2727(78)90008-7
Gërxhani, K., & Schram, A. (2001). Tax evasion and the source of income: An experimental study in albania and the Netherlands. University of Amsterdam, CREED Working Paper.
Hasseldine, J. (2000). Using persuasive communications to increase tax compliance: What experimental research has (and has not) told us. Australian Tax Forum, 15(3), 227–224.
Isaac, R., Walker, J. M., & Williams, A. W. (1994). Group size and the voluntary provision of public goods. Journal of Public Economics, 54(1), 1–36. https://doi.org/10.1016/0047-2727(94)90068-x
Jackson, B. R., & Jones, S. M. (1985). Salience of tax evasion penalties versus detection risk. Journal of the American Taxation Association, 6(2), 7–17. https://doi.org/10.2308/jata-6147364
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. https://doi.org/10.2307/1914185
McGraw, K. M., & Scholz, J. T. (1991). Appeals to civic virtue versus attention to self-Interest: Effects on tax compliance. Law & Society Review, 25(3), 471–498. https://doi.org/10.2307/3053724
Nutin, J., & Greenwald, A. G. (1968). Reward and punishment in human learning. Academic Press.
O’driscoll, G. P., Holmes, K. R., & O’grady, M. A. (2002). 2002 index of economic freedom. The Heritage Foundation.
Palfrey, T., & Prisbrey, J. (1993). Anomalous behaviour in linear public goods experiments: How much and why? California Institute of Technology. Social Science Working Paper 833.
Pyle, D. J. (1991). The economics of taxpayer compliance. Journal of Economic Surveys, 5(2), 163–198.
Roth, J. A., Scholz, J. T., & Witte (eds.), A. D. (1989). Taxpayer compliance. Vol. 1 and Vol. 2. Philadelphia, University of Pennsylvania Press.
Schneider, F., & Enste, D. H. (2000). Shadow economies: Size, causes, and consequences. Journal of Economic Literature, 38(1), 77–114. https://doi.org/10.1257/jel.38.1.77
Schnellenbach, J. (2002). Tax morale, leviathan and the political process: A theoretical approach. Paper presented at the Annual European Public Choice Society Conference in Belgirate, April 4-7.
Schwartz, R. D., & Orleans, S. (1967). On legal sanctions. The University of Chicago Law Review, 34(2), 282–300. https://doi.org/10.2307/1598934
Smith, K. W. (1992). Reciprocity and fairness: Positive incentives for tax compliance. In: J. Slemrod (ed.), Why People Pay Taxes. Tax Compliance and Enforcement. Ann Arbor: University of Michigan Press, 223–258.
Smith, K. W., & Stalans, L. J. (1991). Encouraging tax compliance with positive incentives: A conceptual framework and research directions. Law and Society Review, 13(1), 35–53.
Spicer, M. W., & Becker, L. A. (1980). FISCAL INEQUITY AND TAX EVASION: AN EXPERIMENTAL APPROACH. National Tax Journal, 33(2), 171–175. https://doi.org/10.1086/ntj41862299
Spicer, M. W., & Lundstedt, S. B. (1976). Understandig tax evasion. Public Finance, 31(2), 295–304.
Torgler, B. (2001). What do we know about tax morale and tax compliance? International Review of Economics and Business (RISEC), 48(3), 395–419.
Torgler, B. (2002a). Speaking to theorists and searching for facts: Tax morale and tax compliance in experiments. Journal of Economic Surveys, 16(5), 657–683. https://doi.org/10.1111/1467-6419.00185
Torgler, B. (2002b). Does culture influence tax morale? Evidence from different European countries. University of Basel, WWZ, Discussion Paper 02/05.
Torgler, B. (2002c). Direct democracy matters: Tax morale and political participation. University of Basel, WWZ, Discussion Paper 02/05.
Torgler, B. (2002d). The economic analysis of creative compliance. University of Basel, WWZ, Discussion Paper 02/05.
Torgler, B. (2002e). Preaching matters: Tax morale and religiosity. University of Basel, WWZ, Discussion Paper 03/02.
Torgler, B. (2002f). Vertical and exchange equity in a tax morale experiment. University of Basel, WWZ, Discussion Paper 02/02.
Torgler, B. (2003a). Cross culture comparison of tax morale and tax compliance: Evidence from Costa rica and switzerland. University of Basel, WWZ, Discussion Paper 03/06.
Torgler, B. (2003b). Tax morale, rule-Governed behaviour and trust. Constitutional Political Economy, 14(2), 119–140. https://doi.org/10.1023/a:1023643622283
Torgler, B. (2003c). Tax morale in Latin America. University of Basel, WWZ, Discussion Paper 03/03.
Torgler, B., Schaltegger, C. A., & Schaffner, M. (2003d). Is forgiveness divine? A cross-Culture comparison of tax amnesties. Forthcoming in: Swiss Journal of Economics and Statistics.
Van Huyck, J. B., Battalio, R. C., & Beil, R. O. (1990). Tacit coordination games, strategic uncertainty, and coordination failures. American Economic Review, 80(1), 234–248.
Webley, P. (1987). Audit probabilities and tax evasion in a business simulation. Economics Letters, 25(3), 267–270. https://doi.org/10.1016/0165-1765(87)90226-6
Webley, P., & Halstead, S. (1986). Tax evasion on the micro: Significant simulations or expedient experiments? Journal of Interdisciplinary Economics, 1(2), 87–100. https://doi.org/10.1177/02601079x8600100204
Webley, P., Robben, H., Elffers, H., & Hessing, D. (1991). Tax evasion: An experimental approach. Cambridge University Press.
Webley, P., Robben, H., & Morris, I. (1988). Social comparison, attitudes and tax evasion in a shop simulation. Social Behaviour, 3(3), 219–228.
Zimmerman, D. W. (1987). Comparative power of student T test and mann-Whitney U test for unequal sample sizes and variances. The Journal of Experimental Education, 55(3), 171–174. https://doi.org/10.1080/00220973.1987.10806451
Zimmerman, D. W., & Zumbo, B. D. (1993a). Rank transformations and the power of the student t test and welch t’ test for non-normal populations with unequal variances. Canadian Journal of Experimental Psychology, 47(3), 523–539.
Zimmerman, D. W., & Zumbo, B. D. (1993b). The relative power of parametric and nonparametric statistical methods. In: G. Keren and C. Lewis (eds.), A Handbook for Data Analysis in the Behavioral Sciences, Methodological Issues, 481–517.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2003 Benno Torgler
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Article usage
- ViewsTimes this article's page was opened since the journal started recording statistics. One person can visit more than once.
- 202
- DownloadsTimes the full text of this article (usually the PDF) was opened or downloaded.
- 3,329
All time, as recorded by the journal.
Last 2 years: 58 views, 315 downloads.
16.48 downloads per view (journal average 1.65).Downloads of the full text for every abstract view of this article, compared with the whole journal.
Explore the journal's metrics
