@article{a21690df33094500946d57237be01225,
title = "Bearing the burden: Implications of tax reporting institutions on evasion and incidence",
abstract = "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.",
keywords = "511 Economics, Double auction, Experiment, Social image, Tax evasion, Tax incidence, Third-party reporting",
author = "Kaisa Kotakorpi and Tuomas Nurminen and Topi Miettinen and Satu Mets{\"a}lampi",
note = "Funding Information: We thank A. Brockmeyer, J. Harju, M. Hovi, P.H. Matthews, G. Van Moer, J. Slemrod, J. Sobel, and audiences at Helsinki GSE, MaTax, M-BEPS, MiddExLab Virtual Seminar, NCBEE, Stockholm School of Economics, VSE Prague, IIPF Congress 2019 and ZEW Public Finance 2021 for helpful discussions. We also thank P. Doerrenberg and D. Duncan for kindly sharing their z-Tree code with us and the PCRClab at the U of Turku for hospitality. Kotakorpi gratefully acknowledges financial support from the Research Council of Finland (grant nos. 277283 and 346250 ), Mets{\"a}lampi from the Finnish Cultural Foundation (grant no. 00180719 ), Miettinen from the Yrj{\"o} Jahnsson Foundation (grant no. 20197200 ), Nurminen from the Emil Aaltonen Foundation (grant no. 190171 ), the Society of Swedish Literature in Finland (grant no. 1581 ), and the Yrj{\"o} Jahnsson Foundation (grant nos. 20177015 and 20197206 ). Funding Information: We thank A. Brockmeyer, J. Harju, M. Hovi, P.H. Matthews, G. Van Moer, J. Slemrod, J. Sobel, and audiences at Helsinki GSE, MaTax, M-BEPS, MiddExLab Virtual Seminar, NCBEE, Stockholm School of Economics, VSE Prague, IIPF Congress 2019 and ZEW Public Finance 2021 for helpful discussions. We also thank P. Doerrenberg and D. Duncan for kindly sharing their z-Tree code with us and the PCRClab at the U of Turku for hospitality. Kotakorpi gratefully acknowledges financial support from the Research Council of Finland (grant nos. 277283 and 346250), Mets{\"a}lampi from the Finnish Cultural Foundation (grant no. 00180719), Miettinen from the Yrj{\"o} Jahnsson Foundation (grant no. 20197200), Nurminen from the Emil Aaltonen Foundation (grant no. 190171), the Society of Swedish Literature in Finland (grant no. 1581), and the Yrj{\"o} Jahnsson Foundation (grant nos. 20177015 and 20197206). Publisher Copyright: {\textcopyright} 2024 The Authors",
year = "2024",
month = feb,
day = "19",
doi = "10.1016/j.jebo.2024.01.021",
language = "English",
volume = "220",
pages = "81--134",
journal = "Journal of Economic Behavior & Organization",
issn = "0167-2681",
publisher = "Elsevier BV * North-Holland",
}
