Combating Tax Evasion of Individuals: Prefilling and Restricting the Deductibility of Expenditures in Tax Returns

38 Pages Posted: 22 Jun 2020

See all articles by Martin Fochmann

Martin Fochmann

University of Cologne

Frank Hechtner

Free University of Berlin (FUB)

Tobias Kölle

University of Cologne

Michael Overesch

Universität zu Köln

Date Written: May 28, 2020

Abstract

We experimentally analyze three anti-tax-evasion mechanisms:

1) pre-filling of deductions in tax returns,

2) restricting tax evasion opportunities by either disallowing or

3) limiting the deductibility of expenditures.

We find that pre-filling compared to blank forms reduces tax evasion. Cutting the number of tax evasion opportunities by disallowing the deductibility of expenditure items is an ineffective mechanism to reduce tax evasion as individuals shift their tax evasion activities from the disallowed item to other non-restricted items. In contrast, we find that just limiting the deductibility of expenditures avoids this evasion-shift-effect and finally enhances overall tax compliance.

Keywords: Tax Compliance, Tax Evasion, Deductions, Pre-filled Tax Returns, Behavioral Economics

JEL Classification: C91, D90, H26, K42

Suggested Citation

Fochmann, Martin and Hechtner, Frank and Kölle, Tobias and Overesch, Michael, Combating Tax Evasion of Individuals: Prefilling and Restricting the Deductibility of Expenditures in Tax Returns (May 28, 2020). Available at SSRN: https://ssrn.com/abstract=3613568 or http://dx.doi.org/10.2139/ssrn.3613568

Martin Fochmann (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Behavioral Accounting/Taxation/Finance
Cologne, 50923
Germany

HOME PAGE: http://www.taxation.uni-koeln.de/de/team/prof-dr-martin-fochmann/

Frank Hechtner

Free University of Berlin (FUB) ( email )

Garystrasse 21
Berlin, Berlin 14195
Germany

Tobias Kölle

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Michael Overesch

Universität zu Köln ( email )

Albertus-Magnus-Platz
WiSo-Gebäude
Cologne, 50923
Germany
0221/470-5605 (Phone)

HOME PAGE: http://www.steuer.uni-koeln.de/

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