The Effect of Awareness and Incentives on Tax Evasion

42 Pages Posted: 4 Sep 2013

See all articles by Annette Alstadsæter

Annette Alstadsæter

School of Economics and Business, NMBU

Martin Jacob

University of Navarra, IESE Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 30, 2013

Abstract

We examine the role of tax incentives, tax awareness, and complexity in tax evasion. We observe a specific type of tax evasion among business owners in Swedish administrative panel data, after the tax authority has approved all tax returns. For the period 2006-2009, approximately 5% of tax returns overstate a claimed dividend allowance. Tax awareness decreases and complexity increases the likelihood of misreporting. Our results indicate that some observed misreporting could be accidental, while some misreporting is deliberate tax evasion. We identify a positive and significant effect of tax rates on tax evasion, by exploiting a large kink in the tax schedule. The majority of misreporting cases remains undetected by the tax authority. Self-correction of tax evasion by taxpayers is the dominant type of detection.

Keywords: tax evasion, tax compliance, tax enforcement, tax awareness, detection

JEL Classification: H260, H240, D140

Suggested Citation

Alstadsaeter, Annette and Jacob, Martin, The Effect of Awareness and Incentives on Tax Evasion (August 30, 2013). CESifo Working Paper Series No. 4369, Available at SSRN: https://ssrn.com/abstract=2319837 or http://dx.doi.org/10.2139/ssrn.2319837

Annette Alstadsaeter

School of Economics and Business, NMBU ( email )

Norwegian University of Life Sciences
As
Norway

HOME PAGE: http://https://sites.google.com/view/annettealstadsater/start

Martin Jacob (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

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