Eliciting Taxpayer Preferences Increases Tax Compliance

Lamberton, Cait Poynor, De Neve, Jan-Emmanuel and Norton, Michael I. (2014) Eliciting Taxpayer Preferences Increases Tax Compliance. Working Paper.

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Two experiments show that eliciting taxpayer preferences on government spending -- providing taxpayer agency -- increases tax compliance. We first create an income and taxation environment in a laboratory setting to test for compliance with a "lab tax.'' Allowing a treatment group to express non-binding preferences over tax spending priorities leads to a 16% increase in tax compliance. A follow-up online study tests this treatment with a simulation of paying US federal taxes. Allowing taxpayers to signal their preferences on the distribution of government spending results in a 15% reduction in the stated take-up rate of a questionable tax loophole. Providing taxpayer agency recouples tax payments with the public services obtained in return, reduces general anti-tax sentiment, and holds satisfaction with tax payment stable despite increased compliance with tax dues. With tax noncompliance costing the US government $385 billion annually, providing taxpayer agency could have meaningful economic impact. At the same time, giving taxpayers a voice may act as a two-way "nudge," transforming tax payment from a passive experience to a channel of communication between taxpayers and government.

Item Type: Other Working Paper
Subject(s): Strategy; Entrepreneurship & Global business
Centre: Faculty of Strategy, Entrepreneurship and International Business
Date Deposited: 11 Aug 2015 13:47
Last Modified: 23 Oct 2015 14:08
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5476

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