The Effect of Tax Privacy on Tax Compliance – An Experimental Investigation

28 Pages Posted: 13 Jun 2014 Last revised: 6 Nov 2016

See all articles by Kay Blaufus

Kay Blaufus

Leibniz Universität Hannover

Jonathan Bob

Leibniz Universität Hannover

Philipp E. Otto

European University Viadrina

Nadja Wolf

Leibniz Universität Hannover

Date Written: November 4, 2016

Abstract

In this paper, we use a tax compliance game with a public good to investigate the impact of public disclosure on tax evasion behavior experimentally. Three different types of tax privacy are tested, ranging from complete privacy to full disclosure. We expect two different effects: first, a contagion effect, arising when an individual observes non-compliance of other individuals and therefore reduces her own tax compliance; second, a shame effect of increased tax compliance due to the anticipated shame of being declared a tax evader. Both these effects are supported by the experimental results. However, the shame effect reduces tax evasion only in the short run. The influence of shame diminishes over the course of the experiment with subjects observing the non-compliance of other participants. Thus, our results indicate that when the contagion and the shame effect are present the latter is not strong enough to override the former in the long run. Furthermore, disclosing tax information anonymously increases tax evasion compared to providing no information on tax evasion behavior. These observations are of particular importance for tax policy because public disclosure may lead to more evasion instead of less when supporting a crowding-out of the tax morale.

Keywords: Public tax disclosure, Tax compliance, Tax evasion, Tax publicity

JEL Classification: H24, H26, H30, M40

Suggested Citation

Blaufus, Kay and Bob, Jonathan and Otto, Philipp E. and Wolf, Nadja, The Effect of Tax Privacy on Tax Compliance – An Experimental Investigation (November 4, 2016). European Accounting Review Forthcoming. Available at SSRN: https://ssrn.com/abstract=2449217 or http://dx.doi.org/10.2139/ssrn.2449217

Kay Blaufus (Contact Author)

Leibniz Universität Hannover ( email )

Institut für Betriebswirtschaftliche Steuerlehre
Koenigsworther Platz 1
Hannover, 30167
Germany

Jonathan Bob

Leibniz Universität Hannover ( email )

Institut fur Rechnungslegung und WP
Koenigsworther Platz 1
Hannover, 30167
Germany

Philipp E. Otto

European University Viadrina ( email )

Microeconomics Department
Grosse Scharrnstr. 59
D-15230 Frankfurt (Oder)
Germany

Nadja Wolf

Leibniz Universität Hannover ( email )

Königsworther Platz 1
D-30167 Hannover, 30167
Germany

HOME PAGE: http://www.steuern.uni-hannover.de/wolf.html?&L=1

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