Tax Compliance as a Coordination Game

27 Pages Posted: 6 Apr 2006

See all articles by James Alm

James Alm

Tulane University

Michael McKee

Appalachian State University - Department of Economics

Date Written: October 2003

Abstract

This paper uses laboratory experiments to investigate compliance behavior when returns are selected for audit based upon the deviation of each individual's tax report from the average report of all other taxpayers. Our experimental results indicate that individuals find it difficult to coordinate on the zero-compliance equilibrium. However, pre-game communication that mimics information-sharing provided by tax guides provides a mechanism that allows such coordination. Nevertheless, the tax authority is able to overcome this taxpayer coordination by a subtle change is its audit rule, a change that targets the audits in a different way without increasing the number of audits.

Keywords: Tax Compliance, Coordination Game

JEL Classification: H2

Suggested Citation

Alm, James and McKee, Michael, Tax Compliance as a Coordination Game (October 2003). Andrew Young School of Policy Studies Research Paper Series No. 06-32, Available at SSRN: https://ssrn.com/abstract=895303 or http://dx.doi.org/10.2139/ssrn.895303

James Alm (Contact Author)

Tulane University ( email )

United States
5048628344 (Phone)

Michael McKee

Appalachian State University - Department of Economics ( email )

Boone, NC 28608
United States

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