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40 Years of Tax Evasion Games: A Meta-Analysis

Authors:
James Alm at Tulane University
James Alm
Antoine Malézieux at Burgundy School of Business
Antoine Malézieux
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Abstract and Figures

We collect individual participant data from 70 papers that use laboratory experiments to examine individual tax evasion behavior (or “Tax Evasion Games”), in order to use meta-analysis to estimate the impacts of different public policy, experimental design and individual level variables on tax evasion choices. Our results show that standard enforcement variables like audits (including audit rules) and fines perform differently on the extensive and intensive margins. We find that other fiscal variables like a flat tax system, tax rates, and tax amnesties have unambiguous negative impacts on tax compliance, and that specific features of the experimental setting, such as how subjects are directed to report income, or whether taxes are redistributed to the participants or to a real life public good, have significant impacts on tax compliance. Our results also indicate that the demographic characteristics of the subjects (e.g., gender, experimental income, occupation, risk attitude) affect compliance.
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... Furthermore, Fig. 3 illustrates the distribution of individual compliance rates in year 0 when the audit rate is 0.2 along with the other three audit rates. The meta-analysis conducted by Alm and Malézieux (2021) utilizes data from 70 papers on tax compliance laboratory experiments published between 1978 and 2018. According to their findings, the average audit rate is 0.2 (with a standard deviation of 0.15), the average fine rate is 2.01 (1.47), the average tax rate is 0.34 (0.11), and the average compliance rate is 65% ( 41%). ...
... Figure 4 shows the compliance rates and the proportions of full compliers and full evaders obtained in several experimental studies. Out of 11 articles, we extract the results from experimental sessions relevant to the taxpayer's compliance decision He reports that as a weighted average, the audit rate is 0.23 (0.22), the fine rate is 2.14 (3.74), the tax rate is 0.35 (0.09), and the compliance rate is 59.1% (30.1%), which are similar to the results of the meta-analysis by Alm and Malézieux (2021). under confidentiality. ...
... 15 Considering the eight experimental studies from the fourth column to the last on the horizontal axis in the figure, the audit rates are set at 0.2 or more in their treatments (refer to Table 3 in the Appendix), so the resulting compliance rates in all of those studies except for Laury and Wallace (2005) are around two-thirds. Those results corroborate Alm and Malézieux (2021). However, those audit rates are much higher than the actual rates as these are estimated to be substantially smaller than 0.1 in real societies. ...
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... We measured dishonesty using a tax evasion game ( Figure 2). Tax evasion games have frequently been used in economic studies, 30 including in combination with honesty oaths, 14 and have demonstrated external validity. 31 These games model real-life tax reporting: ...
... ). Based on previous research,14,30 we chose a charity recipient in order to model how taxes redistribute resources and wealth within a society. Participants were also provided with a slider scale that showed how much taxes they would need to pay depending on the income they reported. ...
... whereas a participant generating an actual income of £1.00 but reporting £0 received a bonus payment of £1.00 (1 − .35*0). There was therefore an incentive to underreport the actual income in order to evade higher taxes and keep more of the income -as typical for tax evasion games.30 After reporting their income, participants answered questions measuring their Honesty-Humility, general trust, socioeconomic status, and sleep quality, as well as demographic information including gender, age, and nationality.As a final step, they were debriefed.Tax Compliance. ...
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  • Mar 2024
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... As Dodge (2020, p. 26) notes, "creative data collection is the core of white collar crime research." Creative data collection includes the use of innovative measures of white collar crime as well as the use of multiple methods of measurement (Alm, 2012;Alm & Malézieux, 2021;Elffers et al., 1992). In recognition of this call, we introduce the donation task as an example of a creative behavioral measure scholars can adapt to test emerging theories of white collar crime. ...
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... This variable does not appear to be associated with the choice to evade (χ 2 , P r > 0.05) and, of course, has a positive correlation (0.2200) with the question about willingness to take a risk. This result is in line with previous literature (Alm & Malézieux, 2020). Other control questions • When asked "How well were you compensated for your time and effort in this experiment?" ...
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Preprint
  • Apr 2024
Understanding the factors influencing people’s choices in tax compliance decision-making is still important because tax evasion is a crucial issue for governments everywhere. This lab experiment investigates how social norms influence tax compliance behavior. We examine the effects of positive and negative empirical and normative expectations using the opinion-matching approach for measurement. According to our results, normative expectations—as opposed to empirical expectations—most strongly impact people’s behavior. Surprisingly, positive empirical messages may have a negative effect, increasing tax evasion. Furthering our understanding of the causes of tax evasion, we also include a norm-following task to assess participants’ propensity to adhere to norms. This study presents new viewpoints on tax compliance while replicating some established conclusions from previous research sheds new light on the interaction between tax compliance and social norms.
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... We explored the extent to which economic inequality affects citizens' tendency to cheat, with emphasis on two interrelated dishonest behaviors: tax evasion and cheating to earn extra income. Although tax evasion games are common in the economic literature (Alm & Malézieux, 2021), none of these studies have varied economic inequality experimentally. Therefore, participants were exposed to a simulated society with either high or low economic inequality. ...
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