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Experimental Evidence on Mixing Modes in Income Tax Evasion

Jorge Martinez-Vazquez

Georgia State University, Atlanta

Michael McKee

University of Calgary, Canada

Taxpayers unlawfully trying to avoid income tax in most countries can mis-report a wide variety of line items, including income sources, exemptions, deductions, and credits. Such portfolio opportunities, or "modes," for evasion raise important policy questions. For example, increasing the probability of detection in underreporting of income may increase compliance in terms of income reporting but may decrease compliance as a result of increased evasion through over reporting of deductions. It is possible that the resulting increase in revenue from the mode targeted for increased enforcement effort will be partially, or even fully, offset by deteriorating compliance in other modes. In this article, data from a series of laboratory experiments are used to investigate the compliance behavior of individuals when evasion can be accomplished via multiple items. The findings suggest that increasing enforcement for a single item may lead to revenue declines as evasion increases in other items as an offset.

Key Words: tax evasion • tax enforcement • experimental methods

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This Article Abstract Free Full Text (Free PDF) Free Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Add to Saved Citations Download to citation manager Request Permissions Request Reprints Add to My Marked Citations Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Cummings, R. G. Articles by McKee, M. Search for Related Content Social Bookmarking                   What's this?