Bearing the burden: Implications of tax reporting institutions on evasion and incidence

Kaisa Kotakorpi, Tuomas Nurminen, Topi Miettinen, Satu Metsälampi*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


We investigate effects of tax reporting institutions on evasion and incidence using an experimental double auction market. We find that 28% of the sellers are truthful when only sellers report, but that 88% and 64% of them are truthful under costless and costly third-party reporting by buyers, respectively. Reporting behavior therefore responds to the intensity of deterrence. However, we find that prices do not fully reflect the lower taxes of the evaders. Thus, when sellers can unilaterally evade taxes, tax incidence deviates from the prediction of the standard model, and there is deadweight loss even if tax revenue is low. Pricing, incidence, and reporting patterns in all treatments are consistent with a model with heterogeneous lying costs, or a combination of lying costs and image concerns that give rise to a motivation to appear honest.

Original languageEnglish
Peer-reviewed scientific journalJournal of Economic Behavior & Organization
Pages (from-to)81-134
Number of pages54
Publication statusPublished - 19.02.2024
MoE publication typeA1 Journal article - refereed


  • 511 Economics
  • Double auction
  • Experiment
  • Social image
  • Tax evasion
  • Tax incidence
  • Third-party reporting

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Competition economics and service strategy - Quantitative consumer behaviour and competition economics


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