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Eliciting taxpayer preferences increases tax compliance

De Neve, Jan-Emmanuel, Lamberton, Cait and Norton, Michael I. (2014) Eliciting taxpayer preferences increases tax compliance. CEP Discussion Papers (CEPDP1270). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

Two experiments show that eliciting taxpayer preferences on government spending—providing taxpayer agency--increases tax compliance. We first create an income and taxation environment in a laboratory setting to test for compliance with a lab tax. Allowing a treatment group to express nonbinding preferences over tax spending priorities, leads to a 16% increase in tax compliance. A followup online study tests this treatment with a simulation of paying US federal taxes. Allowing taxpayers to signal their preferences on the distribution of government spending, results in a 15% reduction in the stated take-up rate of a questionable tax loophole. Providing taxpayer agency recouples tax payments with the public services obtained in return, reduces general anti-tax sentiment, and holds satisfaction with tax payment stable despite increased compliance with tax dues. With tax noncompliance costing the US government $385billion annually, providing taxpayer agency could have meaningful economic impact. At the same time, giving taxpayers a voice may act as a two-way "nudge," transforming tax payment from a passive experience to a channel of communication between taxpayers and government.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2014 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: D - Microeconomics > D0 - General > D00 - General
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General
H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I31 - General Welfare; Basic Needs; Living Standards; Quality of Life; Happiness
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 26 Nov 2014 15:29
Last Modified: 20 Feb 2019 03:48
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/60277

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