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

Stephan Muehlbacher, Andre Hartmann, Erich Kirchler, James Alm

Research output: Journal article (peer-reviewed)Journal article

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.

Original languageEnglish
JournalEconomic and Political Studies
DOIs
Publication statusPublished - 22 Sep 2022

Keywords

  • audit probability
  • experimental design
  • fine rate
  • Laboratory experiments
  • tax compliance
  • tax rate

ASJC Scopus subject areas

  • Sociology and Political Science
  • Economics and Econometrics
  • Political Science and International Relations

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