Understanding Cross-Cultural Differences in Peer Reporting Practices: Evidence from Tax Evasion Games in Moldova and France

Abstract

Authorities rely on reporting from private citizens to detect and enforce more than a trivial portion of effective law breaking. This article is the first to experimentally study the cultural aspect of peer reporting. By collecting data in a post-Soviet country (Moldova), we focus in particular on how the Soviet legacy of using citizens as private informants may have a long-lasting effect on their willingness to cooperate with state authorities in present day; we then contrast these effects with peer reporting behavior in a Western society (France). Our results suggest that participants in Moldova view the act of cooperating with central authorities as less socially acceptable than subjects in France and that participants in Moldova engage less frequently in peer reporting than participants in France. However, we also find that less reporting does not necessarily imply less tax compliance. Participants in both countries share very similar tax compliance rates. We explain the effect of peer reporting on tax compliance in Moldova by the country's past experience during the Soviet era when being reported to central authorities was common and came with serious consequences for the person being denounced, ranging from shaming to expropriation.

Keywords: Experiment, Peer Reporting,Tax Evasion