Publications
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Favouring Tax Compliance Through a Simple Automatic Payment Option: Evidence from a Lab Experiment
Abstract
This study investigates whether reducing compliance costs can improve tax compliance. We focus on the impact of automatic payment systems on tax evasion, with the aim of providing evidence relevant for minor indirect taxes, such as the vehicle tax collected by regional governments in Italy.
We design a laboratory experiment in which subjects play a Tax Evasion Game. Participants receive a fixed endowment and perform a real-effort task under time pressure, during which they can earn additional income but are required to pay a tax. While evasion yields a higher expected payoff than compliance, it entails the risk of a substantial fine if detected.
In the treatment condition, we introduce an automatic payment option that allows participants to commit to paying the tax before starting the task. We find that reducing the non-monetary burden of compliance significantly increases tax compliance. Finally, we elicit individual risk preferences and show that they do not account for the treatment effect.