Anti-Tax Evasion, Anti-Corruption and Public Good Provision: An Experimental Analysis of Policy Spillovers

32 Pages Posted: 17 Aug 2020

See all articles by Ritwik Banerjee

Ritwik Banerjee

Indian Institute of Management Bangalore

Amadou Boly

African Development Bank

Robert Gillanders

Dublin City University Business School

Date Written: July 15, 2020

Abstract

We designed a public good laboratory experiment in order to identify the causal relationships between tax evasion and corruption and query whether deterring one of these behaviors may have desirable spillover effects on the other. To do so, we analyse the effects of deterrence when the target is only tax evasion, only corruption, or both tax evasion and corruption, our “Big bang” treatment. Consistent with theoretical predictions, we find that i) the possibility of embezzling tax revenue increases the likelihood and amount of tax evaded; ii) fighting corruption has a significant negative impact on tax evasion, suggesting a crossover effect of deterrence from anti-corruption to anti-tax evasion; iii) penalizing tax evasion does not have a significant impact on embezzlement; indicating that the crossover effect is unidirectional. Interestingly, all three deterrence treatments increase public good provision compared to the baseline treatment, but with a clear ranking: the Big bang approach is the most effective, followed by Anti-corruption, then Anti-evasion. Therefore, faced with two “evils” regarding public good provision, allocating more resource to fighting corruption may be the better policy choice.

Keywords: Corruption, Tax Evasion, Deterrence, Public Good

JEL Classification: C91, D73, H26, H41

Suggested Citation

Banerjee, Ritwik and Boly, Amadou and Gillanders, Robert, Anti-Tax Evasion, Anti-Corruption and Public Good Provision: An Experimental Analysis of Policy Spillovers (July 15, 2020). Available at SSRN: https://ssrn.com/abstract=3652411 or http://dx.doi.org/10.2139/ssrn.3652411

Ritwik Banerjee

Indian Institute of Management Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560 076
India

HOME PAGE: http://www.ritwikbanerjee.in

Amadou Boly (Contact Author)

African Development Bank ( email )

Rue Joseph Anoma
Abidjan, Ivory Coast 01 BP 1387
Ivory Coast (Cote D'ivoire)

Robert Gillanders

Dublin City University Business School ( email )

Dublin 9
Ireland
Dublin 9 (Fax)

HOME PAGE: http://sites.google.com/site/robgillanders/

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