Learning from Academic Learning from Academic Learning from Academic - - PowerPoint PPT Presentation

Learning from Academic Learning from Academic Learning from Academic Learning from Academic Research on Tax Compliance? Research on Tax Compliance? p

James Alm jalm@tulane edu jalm@tulane.edu

I. Insights from theoretical research II Insights from field data and controlled field

• II. Insights from field data and controlled field

experiments h f l b

• III. Insights from laboratory experiments
• IV. Summary: What does all of this evidence
• IV. Summary: What does all of this evidence

really show? V D i i li i t t l i

• V. Devising policies to control evasion

• I. Insights from theoretical research
• I. Insights from theoretical research
• Enforcement matters – but many other factors

matter in the tax compliance decision beyond enforcement.

• Individuals do not always behave as assumed in the

standard economic approach: Behavioral economics and its applications to individual behavior.

• Individuals are social creatures: Behavioral

economics and its applications to group behavior. economics and its applications to group behavior.

• II. Insights from field data and controlled
• II. Insights from field data and controlled

field experiments field experiments

• Deterrence works.
• Even so, the responses to higher audit rates are often

, p g small and differ across individuals – and not everyone responds. p

• Withholding matters, and matters a lot.
• Other fiscal incentives matter (e g tax rates benefits)
• Other fiscal incentives matter (e.g., tax rates, benefits).
• Group factors matter in the individual decision.

• III. Insights from laboratory experiments
• III. Insights from laboratory experiments

D t k

• Deterrence works.
• Even so, the responses to higher audit and penalty rates

are often small and differ across individuals – and not are often small and differ across individuals and not everyone responds

• Individual and group payoffs/rewards matter.
• Uncertainty matters, although its effects are not always

clear cut.

• In the face of uncertainty services matter
• In the face of uncertainty, services matter.
• Cognitive considerations matter: Many individuals
• verweight the probability of an audit.
• verweight the probability of an audit.
• Process matters.
• Audit selection matters.
• Audit information matters.
• Individual motivations matter.
• Tax amnesties matter.

• IV. Summary: What does all this evidence
• IV. Summary: What does all this evidence

reall sho ? reall sho ? really show? really show?

• Individuals are influenced by narrowly defined, and

d d ll b d f l d d b individually based, financial considerations and by the ways in which they process this information.

• Individuals are influenced by social considerations

(e.g., a “social norm”).

• Individuals cannot be represented by a single

representative agent, but must be considered a p g , collection of different segments.

V Devising policies to V Devising policies to control evasion control evasion

• V. Devising policies to
• V. Devising policies to control evasion

control evasion

• The “Enforcement” paradigm: Increase threats

The Enforcement paradigm: Increase threats

Taxpayers are viewed and treated as potential criminals, and the emphasis is on repression of illegal behavior through frequent audits and stiff penalties stiff penalties.

• The “Service” paradigm: Improve service

There is also a role of tax administration as a facilitator and as a provider p

• f services to taxpayer‐citizens.
• The “Trust” paradigm: Change culture

f f Individuals are more likely to respond either to enforcement or services if they believe that the government generally and the tax administration specifically are honest; that is, “trust” in the authorities can have a positive impact on compliance.