James Alm

Why do people pay taxes

Abstract Why do people pay taxes when they have an opportunity, even an incentive, to evade? The experimental results in this paper suggest that tax compliance occurs because some individuals overweight the low probability of audit, although such overweighting is not universal. The results also indicate that compliance does not occur simply because individuals believe that evasion is wrong, since subject behavior is unchanged by the use of either neutral or loaded terms. Finally, there is evidence that individuals pay taxes because they value the public goods that their taxes finance. In short, individuals exhibit much diversity in their behavior.

Does a Seller's eCommerce Reputation Matter? Evidence from eBay Auctions

With internet commerce, a buyer cannot directly examine the product and so must rely upon the accuracy and reliability of the seller in deciding whether and how much to bid. In this setting, the sellers reputation can become an important factor in the bid. This paper examines the impact of the sellers reputation on the willingness of buyers to bid on items sold via internet auctions, using a 1999 mint condition U.S.

Fiscal exchange, collective decision institutions, and tax compliance

5 gold coin whose average price was

Tax Compliance as a Coordination Game

32.73. The empirical results show that the sellers reputation has a positive, statistically significant, but small impact on the price. Copyright 2002 by Blackwell Publishing Ltd

Russian attitudes toward paying taxes – before, during, and after the transition

Abstract It is commonly believed that voluntary tax compliance is affected by the nature of the expenditures and by the manner these expenditure decisions are made. This paper reports on the results of a series of laboratory experiments designed to examine the role of fiscal exchange, the uses of tax revenues and the decision process by which these uses are selected, in individual compliance behavior. Individuals respond positively when tax proceeds are directed toward programs they approve of and when they feel they are active in the decision process.

Seller Reputation, Information Signals, and Prices for Heterogeneous Coins on eBay

This paper uses laboratory experiments to investigate compliance behavior when returns are selected for audit based upon the deviation of each individual’s tax report from the average report of all other taxpayers. Our experimental results indicate that individuals find it difficult to coordinate on the zero-compliance equilibrium. However, pre-game communication that mimics information-sharing provided by tax guides provides a mechanism that allows such coordination. Nevertheless, the tax authority is able to overcome this taxpayer coordination by a subtle change is its audit rule, a change that targets the audits in a different way without increasing the number of audits.

‘Sizing’ the Problem of the Hard-to-Tax

This paper examines citizens’ attitudes toward paying taxes – what is sometimes termed their “tax morale”, or the intrinsic motivation to pay taxes – focusing on the experience of individuals in the Russian Federation. A unique aspect of our analysis is our ability to study tax morale before (1991), during (1995), and shortly after (1999) the transition of the Russian economy from a centrally planned economy to one based on market reliance. Our empirical analysis uses data from the World Values Survey and the European Values Survey. The results show decay in tax morale in the first four years of the transition from 1991 to 1995, and a small recovery in 1999. These results are consistent with the relevance of social norms in tax compliance, where the widespread perception of tax evasion and of a corrupt and inefficient state led initially to a decline of tax morale. However, the results also suggest that the restoration of a higher level of trust in the state, after some progress in the transition to a market economy, positively influenced tax morale. Using disaggregated data for Russian regions, we also find significant regional differences in tax morale, reflecting the degree of trust different regions have toward Moscow’s institutions and policies.

Tax Structure and Tax Compliance

In online commerce, a buyer cannot directly examine the product and has to trust the seller for the product description and delivery. The reputation of the seller (and other information signals on the quality of the product) can therefore affect the buyers willingness to pay. However, while the impact of reputation on willingness to pay for homogeneous goods has been examined, its impact on heterogeneous goods (where there is more uncertainty about product quality) is largely unknown. This paper examines the effects of reputation in online auctions, using U.S. silver Morgan dollar coins in “Almost Uncirculated” condition that are sold on eBay. Empirical results indicate that a sellers overall reputation has a positive impact on a buyers willingness to pay, that negative comments about a seller often have a negative impact, and that these reputational effects increase in importance when there is more uncertainty about the quality of the coin.

For Love or Money? The Impact of Income Taxes on Marriage

Abstract This paper analyzes the hard-to-tax, asking the basic question: Why should the HTT matter to policy makers? In particular, we identify several areas in which we believe that the existence of the HTT may have significant economic effects, and we attempt to provide various informed, if only suggestive, estimates of the size of these impacts; that is, we focus on ‘sizing’ the problem of the HTT. We find that the HTT can have a significant impact on tax revenues, especially for developing countries. We also find that a larger HTT sector leads to a greater reliance in tax structures on indirect taxation. The hard-to-tax seem to be associated with an array of welfare losses driven by the induced misallocation of resources, and these excess burdens can be quite large. The role of the HTT on long run economic development appears to be quite diverse; a larger size of the HTT tends to slow down economic growth in developing countries but it accelerates it in industrialized countries. Finally, we find that the impact of the hard-to-tax on equity is complicated by the final incidence of the forms of tax evasion represented by the hard-to-tax. Nevertheless, even though it may often be the case that HTT groups do not benefit directly from evasion because of the final incidence of this form of tax evasion, it seems uncontroversial that having the hard-to-tax pay their fair share of taxes will improve the overall equity of the tax system.

Audit Certainty, Audit Productivity, and Taxpayer Compliance

A model of individual tax compliance behavior, including evasion and avoidance, is developed and estimated. The model recognizes the importance of marginal income tax rates, payroll tax contributions and benefits, and the probability of detection and the penalty on unpaid taxes. Share equations for avoidance, evasion, and reported income are estimated using individual-level data. The estimation results indicate that the tax base rises with higher benefits for payroll tax contributions and falls with higher marginal tax rates; the base also falls with more severe penalties and more certain detection of evasion as individuals substitute towards avoidance income. Copyright 1990 by MIT Press.