Commitment to Pay Taxes: A Field Experiment on the Importance of Promise

37 Pages Posted: 1 Dec 2016

See all articles by Ann-Kathrin Koessler

Ann-Kathrin Koessler

University of Osnabrück; Queensland University of Technology - Queensland Behavioral Economics Group (QuBE)

Benno Torgler

Queensland University of Technology; CREMA; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Bruno S. Frey

CREMA; University of Basel

Multiple version iconThere are 2 versions of this paper

Date Written: November 29, 2016

Abstract

The ability of a tax authority to successfully collect taxes depends critically on both its relationship with the taxpayers and how strongly these taxpayers are committed to contributing to the common good. We present evidence on a new non-intrusive approach aimed at fostering the commitment to pay taxes. Using a between-subject design in a unique field setting, we experimentally test whether tax compliance can be increased by linking a voluntary promise of timely payment to a reward. We measure the change induced by an additional compliance promise through identifying the pure reward effect. We find that although previously compliant taxpayers are more likely to make a promise, the commitment to do so can improve payment behaviour. This effect, however, is strongly dependent on the type of reward to which the promise is linked. Compliance only increases when the reward is non-financial. No compliance effect is observed if cash is offered in return for promise fulfilment.

Keywords: Tax compliance, field experiment, commitment, promise, supportive incentives, psychological contract

JEL Classification: H26, C93, D03

Suggested Citation

Koessler, Ann-Kathrin and Torgler, Benno and Feld, Lars P. and Frey, Bruno S., Commitment to Pay Taxes: A Field Experiment on the Importance of Promise (November 29, 2016). Tax and Transfer Policy Institute - Working Paper 10/2016. Available at SSRN: https://ssrn.com/abstract=2877464 or http://dx.doi.org/10.2139/ssrn.2877464

Ann-Kathrin Koessler (Contact Author)

University of Osnabrück ( email )

Germany

Queensland University of Technology - Queensland Behavioral Economics Group (QuBE) ( email )

2 George Street
GPO Box 2434
Brisbane, 4510
Australia

Benno Torgler

Queensland University of Technology ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

CREMA

Gellertstrasse 18
Basel
Zurich, CH 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Lars P. Feld

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bruno S. Frey

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

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