Reducing Evasion Through Self-Reporting: Evidence from Charitable Contributions

Abstract

In absence of third-party reporting, taxpayers are required to self-report information with various degrees of detail, ranging from uncorroborated claims to comprehensive records with receipts. Using a quasi-experimental design applied to noncash charitable contribution deductions, I show that even basic self-reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers. I find that simplified reporting requirements reduce reporting costs by $55 per person and substantially increase claimed donations. However, half of the new donations are due to evasion. Thus, information reporting should only be imposed on total reported donations above a pre-specified threshold.

Keywords: Information Reporting, Evasion, Compliance Cost, Tax Filing, Charitable Giving

JEL Classification: D61, D64, H24, H26, H31