scholarly journals Information processing in tax decisions: A MouselabWEB study on the Allingham and Sandmo model of income tax evasion

2020 ◽  
Author(s):  
Christoph Kogler ◽  
Jerome Olsen ◽  
Martin Müller ◽  
Erich Kirchler
Keyword(s):  
Tax Evasion ◽  
Information Acquisition ◽  
Income Tax ◽  
Tax Compliance ◽  
Relevant Information ◽  
Expected Value ◽  
Decision Under Uncertainty ◽  
Tax Rate ◽  
Compliance Decisions ◽  
Expected Values

The highly influential Allingham and Sandmo model of income tax evasion framed the decision whether to comply or to evade taxes as a decision under uncertainty, assuming that taxpayers are driven by utility-maximization. Accordingly, they should choose evasion over compliance if it yields a higher expected profit. We test the main assumptions of this model considering both compliance decisions and the process of information acquisition applying MouselabWEB. In an incentivized experiment, 109 participants made 24 compliance decisions with varying information presented for four within-subject factors (income, tax rate, audit probability, and fine level). Additional explicit expected value information was manipulated between-subjects. The results reveal that participants attended to all relevant information, a prerequisite for expected value like calculations. As predicted by the Allingham and Sandmo model, choices were clearly influenced by deterrence parameters. Against the assumptions, these parameters were not integrated adequately, as evasion did not increase with rising expected rate of return. More transitions between information necessary for calculating expected values did not result in higher model conformity, just as presenting explicit information on expected values. We conclude that deterrence information clearly influences tax compliance decisions in our setting, but observed deviations from the model can be attributed to failure to integrate all relevant parameters.

scholarly journals Tax Morale

2014 ◽  
Vol 28 (4) ◽  
pp. 149-168 ◽  
Author(s):  
Erzo F. P. Luttmer ◽  
Monica Singhal
Keyword(s):  
Tax Evasion ◽  
Tax Policy ◽  
Field Experiments ◽  
Tax Compliance ◽  
Natural Experiments ◽  
Tax Morale ◽  
Tax Rate ◽  
Key Policy ◽  
Compliance Decisions ◽  
Underlying Mechanisms

There is an apparent disconnect between much of the academic literature on tax compliance and the administration of tax policy. In the benchmark economic model, the key policy parameters affecting tax evasion are the tax rate, the detection probability, and the penalty imposed conditional on the evasion being detected. Meanwhile, tax administrators also tend to place a great deal of emphasis on the importance of improving “tax morale,” by which they generally mean increasing voluntary compliance with tax laws and creating a social norm of compliance. We will define tax morale broadly to include nonpecuniary motivations for tax compliance as well as factors that fall outside the standard, expected utility framework. Tax morale does indeed appear to be an important component of compliance decisions. We demonstrate that tax morale operates through a variety of underlying mechanisms, drawing on evidence from laboratory studies, natural experiments, and an emerging literature employing randomized field experiments. We consider the implications for tax policy and attempt to understand why recent interventions designed to improve morale, and thereby compliance, have had mixed results to date.

scholarly journals Factors affecting the corporate income tax compliance in private enterprises in Ba Ria – Vung Tau province

2021 ◽  
Vol 5 (2) ◽  
pp. first
Author(s):  
Lê Thị Bảo Như ◽  
Nguyễn Thị Thu Hảo ◽  
Nguyễn Thị Hồng Hạnh
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Linear Regression Analysis ◽  
Tax Avoidance ◽  
Tax Compliance ◽  
Corporate Income Tax ◽  
Survey Method ◽  
Private Enterprises ◽  
Tax Rate ◽  
Factors Affecting

The corporate income tax management in Vietnam in general and Ba Ria - Vung Tau province, in particular, are facing a big challenge, which is finding the means of tax sufficient collection and avoidance of tax evasion. However, tax fraud or tax avoidance has been complicated and the number of these illegal activities tends to increase. From practical requirements, this paper contributes to the gap of previous studies by identifying factors affecting the corporate income tax compliance in private enterprises in Ba Ria - Vung Tau province. By survey method and linear regression analysis, the results show that there are seven factors that affect corporate income tax compliance, including the simplicity in tax declaration, tax inspection, the fairness of tax system, tax rate, financial status, the taxpayer's knowledge, and tax administration performance. Of all factors, the tax rate factor has a negative effect and the remaining factors have a positive effect on corporate income tax compliance. Based on these results, the authors propose some solutions to encourage private enterprises to comply with the corporate income tax regulations in Ba Ria - Vung Tau province.

scholarly journals PROSPECT THEORY AND TAX COMPLIANCE: A MICROFOUNDED EQUILIBRIUM PERSPECTIVE

2019 ◽  
pp. 177-198
Author(s):  
Maria Carmela APRILE ◽  
Francesco BUSATO ◽  
Francesco GIULI ◽  
Enrico MARCHETTI
Keyword(s):  
Prospect Theory ◽  
Tax Evasion ◽  
Tax Compliance ◽  
The United States ◽  
Individual Choice ◽  
Tax Rate ◽  
Empirical Estimates ◽  
Open Questions ◽  
United States Economy ◽  
Compliance Decisions

This paper discusses the capabilities of a class of microfounded equilibrium models, augmented with Prospect Theory elements in the spirit of al- Nowaihi and Dhami (2007), to address several open questions in the analysis of tax evasion and compliance decisions. There are three main results: i) there exists a unique equilibrium with a tax evasion, consistent with the empirical estimates for the United States economy; ii) the model predicts a positive relationship between tax rate and evasion rate, while offering a solution to the so called Yitzhaki puzzle; iii) the «framing effect» plays a significant role in supporting these results; this is a distinctive characterstic of this class of model, typically not present in simple individual choice models. Furthermore, the model also allows us to investigate some potentially relevant effects of labor supply behavior on the tax compliance decisions.

scholarly journals Personal Income Tax Compliance at the Regional Level: The Role of Persistence, Neighborhood, and Decentralization

2020 ◽  
pp. 016001762094281
Author(s):  
Julio López-Laborda ◽  
Jaime Vallés-Giménez ◽  
Anabel Zárate-Marco
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Fiscal Decentralization ◽  
Tax Compliance ◽  
Personal Income ◽  
Extensive Literature ◽  
Personal Income Tax ◽  
Institutional Variables ◽  
The Public ◽  
The Individual

This article quantifies personal income tax compliance by regions for the first time in Spain and identifies the factors explaining differences in tax compliance between regions, an aspect that has scarcely been analyzed in the literature. To this end, and in addition to the dynamic and spatial components considered by Alm and Yunus, this article considers the variables included in the classical tax evasion model of Allingham and Sandmo, as well as tax morale and political-institutional variables, including those linked to the country’s fiscal decentralization. The results obtained confirm, on one hand, those reached in the very extensive literature studying tax evasion from the individual perspective (including the importance of the dynamic element) and, on the other, the relevance of the spatial component in explaining tax compliance, so that greater or lesser tax compliance is partly explained by factors such as the tax behavior of neighbors or how those neighbors are treated by the public sector.

Legitimate authorities and rational taxpayers: An investigation of voluntary compliance and method effects in a survey experiment of income tax evasion

2018 ◽  
Vol 30 (2) ◽  
pp. 247-301 ◽  
Author(s):  
Blaine Robbins ◽  
Edgar Kiser
Keyword(s):  
Tax Evasion ◽  
Economic Model ◽  
Income Tax ◽  
Tax Compliance ◽  
Order Effects ◽  
Survey Experiment ◽  
Missing Information ◽  
Information Effects ◽  
Voluntary Compliance ◽  
Method Effects

In order to collect the revenue necessary to fund public goods, a state is often required to both deter tax evasion and encourage voluntary tax compliance on the part of its citizens. While most prior research has focused on explaining tax evasion with standard economic model parameters, there has been growing interest in identifying the determinants of voluntary compliance. We build on this work by proposing a legitimacy-based model of tax compliance that accounts for why some citizens voluntarily comply with their tax obligations and others do not. To test our model, we develop and administer a survey experiment of income tax evasion to a large random sample of undergraduate students. We also investigate the extent to which design-based method effects bias our results, such as order effects, complexity effects, and missing information effects. Substantively, results strongly support the standard economic model of deterrence and weakly support the legitimacy-based model of voluntary compliance. Methodologically, we find no evidence of order effects, weak evidence of complexity effects, and suggestive evidence of missing information effects.

scholarly journals Income Tax Avoidance and Evasion

2016 ◽  
Vol 45 (6) ◽  
pp. 815-837 ◽  
Author(s):  
Duccio Gamannossi degl’Innocenti ◽  
Matthew D. Rablen
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Tax Avoidance ◽  
Expected Return ◽  
Tax Rate ◽  
Increasing Function ◽  
Reported Income

We characterize optimal individual tax evasion and avoidance when taxpayers “narrow bracket” the joint avoidance/evasion decision by exhausting all gainful methods for legal avoidance before choosing whether or not also to evade illegally. We find that (1) evasion is an increasing function of the audit probability when the latter is low enough, yet tax avoidance is always decreasing in the probability of audit; (2) an analogous finding to the so-called Yitzhaki puzzle for evasion also holds for tax avoidance—an increase in the tax rate decreases the level of avoided income and the level of avoided tax; and (3) that, holding constant the expected return to evasion, it is not always the case that the combined loss of reported income due to avoidance and evasion can be stemmed by increasing the fine rate and decreasing the audit probability.

scholarly journals Study on system fairness dimensions and tax compliance in the Middle East context

2020 ◽  
Vol 18 (1) ◽  
pp. 181-191 ◽  
Author(s):  
Saeed Awadh Bin-Nashwan ◽  
Ahmed Mubarak Al-Hamedi ◽  
Munusamy Marimuthu ◽  
Abobakr Ramadhan Al-Harethi
Keyword(s):  
Middle East ◽  
Income Tax ◽  
Tax Compliance ◽  
General System ◽  
Analysis Tool ◽  
Tax System ◽  
Tax Rate ◽  
Compliance Behavior ◽  
Self Interest ◽  
The Government

People’s perceptions of a fair tax administration system have garnered growing interest as a decisive ingredient that can install compliance behavior among taxpayers. The tax that taxpayers wish to evade is determined by their perceptions of the various robust dimensions of fairness (i.e., general fairness, preferred tax rate structure, exchange with the government, special provisions, and self-interest). Such an important matter, like tax fairness, has been overlooked in the extant literature, especially in the Middle East context, although tax administrations still suffer from low and unsatisfactory rates of compliance. This paper aims to empirically examine the influence of fairness perceptions of the income tax system on compliance behavior of taxpayers in Yemen. The study used a survey questionnaire administered to 400 individual taxpayers in Hadhramout, one of the most prosperous business regions in Yemen. Based on the PLS-SEM analysis tool, the study found that general system fairness, preferred tax rate, exchange with the government, and the extent of self-interest are significantly related to income tax compliance, while special provisions do not affect compliance decisions. The results of the study can alert the tax authority and policymakers to consider the non-pecuniary factors, other than the measures of the coercion. Establishing a fair tax system is probably one of the most successful approaches to boost compliance among taxpayers, thus yielding more tax revenue and diminishing the administrative cost for the tax authority.

scholarly journals EMPIRICAL INVESTIGATION OF TAX COMPLIANCE DETERMINANTS IN KATSINA STATE, NIGERIA

2020 ◽  
pp. 247-268
Author(s):  
Sani Rabiu ◽  
Daud Mustafa
Keyword(s):  
Peer Influence ◽  
National Development ◽  
Tax Compliance ◽  
Primary Source ◽  
Probit Model ◽  
Relevant Information ◽  
Policy Formulation ◽  
Policy Makers ◽  
Tax Rate ◽  
Multinomial Probit Model

Tax compliance is determined by many factors, which are categorized into social, economic, institutional, demographic and individual factors. In this regard, the main objective of this study is to empirically evaluate and understand tax compliance determinants usingdata generated from agro-allied industries in some selected local government areas of Katsina state, Nigeria. As such, primary source of data was employed through the use of structured questionnaire to collect relevant information from all the 133 agro-allied industries in the study area and multinomial probit model was adopted for estimation. Basically, the findings from this study indicate that tax rate, level of income, perception on government spending, change in government policy, simplicity of tax system and efficiency of the tax authority are significant determinants of tax compliance among agro-allied industries in the study area; whereas perception on equity and peer influence are insignificant determinants. In this connection therefore, the study recommends that government should ensure efficient allocation of public funds, in order to fiscally motivate taxpayers to develop compliance attitude. Also, policy formulation and implementation should physically be centered towards improving the quality of life of citizens, so as to improve taxpayers’ belief in policy makers thereby increasing the level of compliance. And finally, the tax authorities should be transparent and accountable in tax collection, which may result to positive compliance as well as increase in tax revenue yield for national development.

scholarly journals Pengaruh Pengalaman Diperiksa terhadap Kepatuhan Pajak Perusahaan Besar

2019 ◽  
Vol 3 (3) ◽  
pp. 219-235
Author(s):  
Achmad Rivai Muzakkir ◽  
Benedictus Raksaka Mahi
Keyword(s):  
Income Tax ◽  
Oil And Gas ◽  
Selection Process ◽  
Listed Company ◽  
Tax Compliance ◽  
Tax Rate ◽  
Gas Tax ◽  
Tax Audit ◽  
Two Step Estimation ◽  
The Relationship

Artikel ini mempelajari hubungan antara jumlah pemeriksaan yang pernah dialami sebelumnya dengan kepatuhan pembayaran pajak penghasilan perusahaan. Fokus penelitian adalah wajib pajak pada KPP Wajib Pajak Besar, KPP Minyak dan Gas Bumi, dan KPP PMB. Heckman Two Step Estimation digunakan untuk mengestimasi aturan seleksi pemeriksaan, dan keputusan kepatuhan perusahaan. Hasil estimasi tahap pertama menunjukkan bahwa ada aturan yang sistematis dalam proses seleksi pemeriksaan. Hasil estimasi tahap kedua menunjukkan bahwa perusahaan dengan jumlah pemeriksaan lebih banyak, keuntungan yang lebih rendah, average tax rate yang lebih rendah memiliki rasio kepatuhan yang lebih tinggi.Kata kunci : kepatuhan; kepatuhan pajak; pemeriksaan pajak; pajak penghasilan; seleksi pemeriksaan, ABSTRACTThis paper examines the relationship between the amount of past audit experience and firm’s income tax compliance. Focusing upon taxpayers in Large Taxpayer Tax Office, Oil and Gas Tax Office, and Listed Company Tax Office. A Heckman two step estimation is used to estimate the audit selection rule the firm’s compliance choice. The first step estimation results indicate that there is a systematic rule as a guidance in the selection process. The second stage results show that firms with more past audit experience, have a lower profit, and a lower average tax rate have a higher compliance ratio.Key words : compliance; tax compliance; tax audit; income tax; audit selectionJEL Classification : H26.D22

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