Template-Type: ReDIF-Paper 1.0
Author-Name: Kaisa Kotakorpi
Author-Name-First: Kaisa
Author-Name-Last: Kotakorpi
Author-Email: kaisa.kotakorpi@tuni.fi
Author-Workplace-Name: Finnish Centre of Excellence in Tax Systems Research (FIT), Tampere University and VATT Institute for Economic Research
Author-Name: Tuomas Nurminen
Author-Name-Last: Nurminen
Author-Name-First: Tuomas
Author-Email: tuomas.nurminen@hanken.fi
Author-Workplace-Name: Hanken School of Economics and Helsinki GSE
Author-Name: Topi Miettinen
Author-Name-First: Topi
Author-Name-Last: Miettinen
Author-Email: topi.miettinen@hanken.fi
Author-Workplace-Name: Hanken School of Economics and Helsinki GSE
Author-Name: Satu Metsälampi
Author-Name-First: Satu
Author-Name-Last: Metsälampi
Author-Email: satu.metsalampi@utu.fi
Author-Workplace-Name: University of Turku
Title: Bearing the burden – Implications of tax reporting institutions and image concerns on evasion and incidence
Abstract: We investigate effects of tax reporting institutions on evasion and incidence using
an experimental double auction market setting. 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 can be explained by a model of lying costs with image concerns that
give rise to a motivation to appear honest.
Length: 79 pages
Creation-Date:  2022-11
Publication-Status: Published in FIT Working Paper Series, Finnish Center of Excellence in Tax Systems Research
File-URL: https://verotutkimus.fi/verotutkimus/wp-content/uploads/2022/11/FIT-WP3-Bearing-the-burden.pdf
File-Format: Application/pdf
File-Function: First version, 2022
Number: 3
Classification-JEL: H21, H22, H26, D40, D44, D91
Keywords: Tax Evasion, Tax Incidence, Third-Party Reporting, Double Auction, Social image, Experiment
Handle: RePEc:fit:wpaper:3