The Effect of Awareness and Incentives on Tax Evasion

Annette Alstadsæter

University of Oslo; CESifo (Center for Economic Studies and Ifo Institute)

Martin Jacob

WHU - Otto Beisheim School of Management

August 30, 2013

CESifo Working Paper Series No. 4369

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.

Number of Pages in PDF File: 42

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

JEL Classification: H260, H240, D140

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Date posted: September 4, 2013  

Suggested Citation

Alstadsæter, 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: http://ssrn.com/abstract=2319837

Contact Information

Annette Alstadsaeter
University of Oslo ( email )
Department of Health Management and Health Economi
P.b. 1089 Blindern
Oslo, N-0317
HOME PAGE: http://folk.uio.no/annetals/
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Martin Jacob (Contact Author)
WHU - Otto Beisheim School of Management ( email )
Burgplatz 2
D-56179 Vallendar, 56179
HOME PAGE: http://www.whu.edu/steuer
Feedback to SSRN

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