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International Tax and Public Finance

, Volume 25, Issue 3, pp 722–756 | Cite as

Behavioral dynamics of tax compliance when taxpayer assistance services are available

  • Michael McKee
  • Caleb A. Siladke
  • Christian A. Vossler
Article

Abstract

This research utilizes a laboratory experiment involving a large and diverse set of participants to investigate the behavioral dynamics of tax reporting in a setting where tax liability is uncertain and the tax agency makes a service available to help resolve the uncertainty. Our design varies the level of liability uncertainty, as well as the cost and quality of the information service. We find that, in the absence of an information service regime, the behavioral response to past audits, whether penalizing or not, is to report a lower tax liability. However, with an information service present (regardless of whether it is accessed), behavioral responses to past audits are no longer found. Interestingly, information service acquisition decreases modestly in response to a penalizing audit, although as the experiment progressed a larger proportion of participants were compliant, offsetting this effect. Mirroring the few experimental studies that have investigated tax liability information services, we find that providing these services has a strong and positive effect on tax compliance.

Keywords

Tax evasion Tax compliance Behavioral dynamics Behavioral economics Experimental economics 

JEL Classification

H26 C91 

Notes

Acknowledgements

The authors thank Michael Jones for excellent software development. This research was undertaken in partial fulfillment of IRS contract TIRNO-09-Z-00019. The views expressed are those of the authors and do not reflect the opinions of the IRS or of any researchers working within the IRS.

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  • Michael McKee
    • 1
  • Caleb A. Siladke
    • 2
  • Christian A. Vossler
    • 3
  1. 1.Department of EconomicsAppalachian State UniversityBooneUSA
  2. 2.Department of EconomicsUniversity of TennesseeKnoxvilleUSA
  3. 3.Department of Economics and Howard H. Baker Jr. Center for Public PolicyUniversity of TennesseeKnoxvilleUSA

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