The Tax Compliance Demand Curve: A Diagrammatical Approach to Income Tax Evasion

2007 ◽  
Author(s):  
Gideon Yaniv
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Demand Curve ◽  
Tax Compliance

scholarly journals Personal Income Tax Compliance at the Regional Level: The Role of Persistence, Neighborhood, and Decentralization

2020 ◽  
pp. 016001762094281
Author(s):  
Julio López-Laborda ◽  
Jaime Vallés-Giménez ◽  
Anabel Zárate-Marco
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Fiscal Decentralization ◽  
Tax Compliance ◽  
Personal Income ◽  
Extensive Literature ◽  
Personal Income Tax ◽  
Institutional Variables ◽  
The Public ◽  
The Individual

This article quantifies personal income tax compliance by regions for the first time in Spain and identifies the factors explaining differences in tax compliance between regions, an aspect that has scarcely been analyzed in the literature. To this end, and in addition to the dynamic and spatial components considered by Alm and Yunus, this article considers the variables included in the classical tax evasion model of Allingham and Sandmo, as well as tax morale and political-institutional variables, including those linked to the country’s fiscal decentralization. The results obtained confirm, on one hand, those reached in the very extensive literature studying tax evasion from the individual perspective (including the importance of the dynamic element) and, on the other, the relevance of the spatial component in explaining tax compliance, so that greater or lesser tax compliance is partly explained by factors such as the tax behavior of neighbors or how those neighbors are treated by the public sector.

Legitimate authorities and rational taxpayers: An investigation of voluntary compliance and method effects in a survey experiment of income tax evasion

2018 ◽  
Vol 30 (2) ◽  
pp. 247-301 ◽  
Author(s):  
Blaine Robbins ◽  
Edgar Kiser
Keyword(s):  
Tax Evasion ◽  
Economic Model ◽  
Income Tax ◽  
Tax Compliance ◽  
Order Effects ◽  
Survey Experiment ◽  
Missing Information ◽  
Information Effects ◽  
Voluntary Compliance ◽  
Method Effects

In order to collect the revenue necessary to fund public goods, a state is often required to both deter tax evasion and encourage voluntary tax compliance on the part of its citizens. While most prior research has focused on explaining tax evasion with standard economic model parameters, there has been growing interest in identifying the determinants of voluntary compliance. We build on this work by proposing a legitimacy-based model of tax compliance that accounts for why some citizens voluntarily comply with their tax obligations and others do not. To test our model, we develop and administer a survey experiment of income tax evasion to a large random sample of undergraduate students. We also investigate the extent to which design-based method effects bias our results, such as order effects, complexity effects, and missing information effects. Substantively, results strongly support the standard economic model of deterrence and weakly support the legitimacy-based model of voluntary compliance. Methodologically, we find no evidence of order effects, weak evidence of complexity effects, and suggestive evidence of missing information effects.

scholarly journals Income Tax Compliance Cost of Corporations in India, 2000–01

2006 ◽  
Vol 31 (4) ◽  
pp. 9-30
Author(s):  
Arindam Das-Gupta
Keyword(s):  
Cash Flow ◽  
Tax Evasion ◽  
Income Tax ◽  
Tax Compliance ◽  
Postal Survey ◽  
Legal Compliance ◽  
Compliance Cost ◽  
Convenience Sample ◽  
Compliance Costs ◽  
Corporation Tax

This is the first study of compliance costs of income taxation of corporations in India. Compliance costs are the costs of meeting obligations under the income tax law and in planning to save taxes. Opportunity costs such as when tax refunds are delayed are also included. Social compliance costs, gross versus net private costs, and mandatory versus voluntary cost can be distinguished. Gross private compliance costs include both legal and illegal expenses (such as bribes paid), employee costs, the cost of tax advice, and also other non-labour expenses. Estimates in this paper are for the year 2000-01 based on a postal survey of 45 companies throughout India in August-September 2001. Estimated gross compliance costs, excluding bribe costs, are between 5.6 and 14.5 per cent of corporation tax revenues. These are similar to estimates for other countries near the lower limit but are a cause for concern near the upper limit. Tax deductibility of legal expenses and cash flow benefits from the timing difference between taxable income and payment of tax result in net compliance costs between minus 0.7 and plus 0.6 per cent of corporation tax revenue. Both gross and net compliance costs are regressive. Among other findings, five are noteworthy: First, around 25 per cent of sampled companies knowingly paid excess tax (median value: 46%) since tax evasion penalty cannot be levied under Indian law if assessed taxes have already been paid. Second, 70 per cent of companies, especially small companies, used external assistance to prepare tax returns accounting for 39 per cent of the legal compliance costs. Third, voluntary costs associated with tax planning contribute 19 to 43 per cent of total compliance costs. Fourth, the average sample company had 10 to 11 assessment years locked in disputes for tax or penalty in addition to around two years for which assessments were incomplete. Statistical analysis suggested that one extra disputed assessment year raises legal compliance costs by 5.7 per cent. Fifth, it was found to be fairly common for incorrect application of tax laws by tax officials in areas where they have high discretion to cause tax assessments to be revisited. Among reform suggestions is streamlining of 22 legal and procedural �hot spots� which add to compliance costs. Since the response rate was a disappointing 1.15 per cent, the stratified random sample design degenerated into a convenience sample with over-representation of large firms and under-representation of loss-making and zero-profit companies. Therefore, results should be viewed as preliminary and tentative. Other problems are that there were only qualitative questions about in-house cost components; assumed opportunity cost of funds to value cash flow benefits were used; and, as in earlier studies, there can possibly be a bias due to incorrect apportionment of fixed costs and the value of time of company management

scholarly journals Information processing in tax decisions: A MouselabWEB study on the Allingham and Sandmo model of income tax evasion

2020 ◽  
Author(s):  
Christoph Kogler ◽  
Jerome Olsen ◽  
Martin Müller ◽  
Erich Kirchler
Keyword(s):  
Tax Evasion ◽  
Information Acquisition ◽  
Income Tax ◽  
Tax Compliance ◽  
Relevant Information ◽  
Expected Value ◽  
Decision Under Uncertainty ◽  
Tax Rate ◽  
Compliance Decisions ◽  
Expected Values

The highly influential Allingham and Sandmo model of income tax evasion framed the decision whether to comply or to evade taxes as a decision under uncertainty, assuming that taxpayers are driven by utility-maximization. Accordingly, they should choose evasion over compliance if it yields a higher expected profit. We test the main assumptions of this model considering both compliance decisions and the process of information acquisition applying MouselabWEB. In an incentivized experiment, 109 participants made 24 compliance decisions with varying information presented for four within-subject factors (income, tax rate, audit probability, and fine level). Additional explicit expected value information was manipulated between-subjects. The results reveal that participants attended to all relevant information, a prerequisite for expected value like calculations. As predicted by the Allingham and Sandmo model, choices were clearly influenced by deterrence parameters. Against the assumptions, these parameters were not integrated adequately, as evasion did not increase with rising expected rate of return. More transitions between information necessary for calculating expected values did not result in higher model conformity, just as presenting explicit information on expected values. We conclude that deterrence information clearly influences tax compliance decisions in our setting, but observed deviations from the model can be attributed to failure to integrate all relevant parameters.

An Examination of Taxpayers Attitude towards Income Tax: A Case of Bangladesh

2021 ◽  
Vol 6 (2) ◽  
pp. 95-110
Author(s):  
Md. Shahbub Alam
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Quantitative Research ◽  
Negative Relationship ◽  
Tax Compliance ◽  
Primary Source ◽  
Primary Data ◽  
National Bureau ◽  
Quantitative Research Methods ◽  
The Government

Objective - Taxation is the government's primary source of revenue, but it is unable to raise this revenue from the general public. The major goals of this article are to determine the taxpayers' attitudes toward income tax in Bangladesh, as well as the factors influencing taxpayers' behavioral intentions regarding tax evasion and avoidance. Both qualitative and quantitative research methods were used in this study. Methodology/Technique - The respondents' primary data was acquired by a standardized written questionnaire and a face-to-face viva. To complete the job, the study used purposeful random sampling, which resulted in the selection of 150 individuals from various occupations. After gathering data, it was examined using several statistical methods. Findings - The study's findings reveal a significant negative relationship between taxpayer attitudes regarding tax evasion and tax compliance behavior, as well as the fact that taxpayer attitudes and conduct differ by occupation, resulting in diverse tax evasion and avoidance trends. Novelty - This study will aid the government authority and the National Bureau of Revenue in monitoring taxpayer attitudes and improving tax collection by reducing taxpayers' negative attitudes toward taxes and getting more people to file tax returns. Type of Paper - Empirical. Keywords: Taxpayers; Attitude; Income tax; Bangladesh. JEL Classification: H21; H24: H26.

Two General Lessons from the 2019 Personal Income Tax Reform of China

2019 ◽  
Vol 16 (1) ◽  
Author(s):  
Zhiyong An
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Tax Reform ◽  
Tax Compliance ◽  
Personal Income ◽  
Third Party ◽  
Tax Incidence ◽  
Personal Income Tax ◽  
Academic Researchers ◽  
Income Tax Reform

Abstract We have identified two general lessons, suggested from the 2019 personal income tax reform of China, regarding third-party reporting, tax compliance, and tax incidence. First, third-party reporting is an effective mechanism to enforce tax compliance. Second, tax evasion can affect tax incidence. We argue that these two general lessons are important for both academic researchers and policymakers.

scholarly journals Envelope wages, hidden production and labor productivity

2019 ◽  
Vol 19 (2) ◽  
Author(s):  
Alessandro Di Nola ◽  
Georgi Kocharkov ◽  
Aleksandar Vasilev
Keyword(s):  
Labor Productivity ◽  
Informal Economy ◽  
Tax Evasion ◽  
Income Tax ◽  
Tax Compliance ◽  
Large Degree ◽  
Quantitative Model ◽  
Tax Reforms ◽  
Social Contributions ◽  
Joint Decisions

Abstract We evaluate the relative importance of aggregate labor productivity versus income taxes and social contributions for tax compliance in an economy with a large degree of informality. Empirical evidence points out that tax evasion in Europe happens through partially concealing wages and profits in formally registered enterprises. To this end, we build a model in which employer-employee pairs of heterogeneous productive capacities make joint decisions on the degree of tax evasion. The quantitative model is used to analyze the case of Bulgaria which has the largest informal economy in Europe and underwent a number of important tax reforms over the period 2000–2014, including the introduction of a flat income tax in 2008. The estimation strategy relies on matching the empirical series for the size of the informal economy and other aggregate outcomes for 2000–2014. Our counterfactual experiments show that the most important factor for the changing size of the informal economy is labor productivity, which accounts for more than 75% of the change. The variation in corporate income tax accounts for the rest. We find that the 2008 flat tax reform did not play any visible role in coping with informality.

scholarly journals Transparency, Elections, and Pakistani Politicians’ Tax Compliance

2019 ◽  
Vol 53 (7) ◽  
pp. 1060-1091
Author(s):  
Rabia Malik
Keyword(s):  
Tax Evasion ◽  
Income Tax ◽  
Tax Compliance ◽  
Information Provision ◽  
Political Accountability ◽  
Asset Ownership ◽  
Difference In Differences ◽  
Electoral Incentives ◽  
Heterogeneous Effects ◽  
Tax Payments

A growing literature on political accountability focuses on the extent to which voters electorally punish politicians when provided with credible negative information about politicians’ actions. Whether politicians respond to information provision by changing their behavior—thus appearing accountable to voters—is an integral part of this puzzle but has received comparatively little attention. I address this gap by exploiting an unforeseen decision by the Pakistani government to publicly release legislators’ past income tax payments, and measure the effect of the information provision on their tax payments in the following year. Using new data on politicians’ asset ownership and tax payments in a difference-in-differences research design, I provide strong evidence that the pressure to decrease tax evasion was highest for competitively and directly elected legislators. These heterogeneous effects are not explained by differences between legislators or electoral constituencies, supporting the hypothesis that electoral incentives condition legislator responsiveness to information shocks.

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