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A self-funding reward mechanism for tax compliance

Fatas, Enrique; Nosenzo, Daniele; Sefton, Martin; Zizzo, Daniel John

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Authors

Enrique Fatas

Daniele Nosenzo

Daniel John Zizzo



Abstract

We compare in a laboratory experiment two audit-based tax compliance mechanisms that collect fines from those found non-compliant. The mechanisms differ in the way fines are redistributed to individuals who were either not audited or audited and found to be compliant. The first, as is the case in most extant tax systems, does not discriminate between the un-audited and those found compliant. The second targets the redistribution in favor of those found compliant. We find that targeting increases compliance when paying taxes generates a social return. We do not find any increase in compliance in a control treatment where individuals audited and found compliant receive symbolic rewards. We conclude that existing tax mechanisms have room for improvement by rewarding those audited and found compliant.

Citation

Fatas, E., Nosenzo, D., Sefton, M., & Zizzo, D. J. (2021). A self-funding reward mechanism for tax compliance. Journal of Economic Psychology, 86, Article 102421. https://doi.org/10.1016/j.joep.2021.102421

Journal Article Type Article
Acceptance Date Jul 7, 2021
Online Publication Date Jul 21, 2021
Publication Date Oct 1, 2021
Deposit Date Sep 9, 2021
Publicly Available Date Jan 22, 2023
Journal Journal of Economic Psychology
Print ISSN 0167-4870
Electronic ISSN 0167-4870
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 86
Article Number 102421
DOI https://doi.org/10.1016/j.joep.2021.102421
Keywords Tax evasion, rewards, audits
Public URL https://nottingham-repository.worktribe.com/output/6190381
Publisher URL https://www.sciencedirect.com/science/article/pii/S0167487021000544?via%3Dihub

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