40 years of tax evasion games: a meta-analysis
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40 years of tax evasion games: a meta‑analysis James Alm1 · Antoine Malézieux2 Received: 9 November 2019 / Revised: 7 July 2020 / Accepted: 3 September 2020 © Economic Science Association 2020
Abstract 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. Keywords Tax evasion · Tax compliance · Meta-analysis JEL classification C9 · H0 · H3
1 Introduction The year 2018 marked the 40th anniversary of the first article that used laboratory experiments to examine individual tax evasion behavior—what we term “Tax Evasion Games” (or TEGs). In this seminal contribution, Friedland et al. (1978) asked 15 Israeli psychology undergrads to take part in the following experiment: * Antoine Malézieux antoine.malezieux@bsb‑education.com James Alm [email protected] 1
Department of Economics, Tulane University, 208 Tilton Hall, New Orleans, LA 70118, USA
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CEREN, EA 7477, Burgundy School of Business, Université Bourgogne Franche-Comté, 29 Rue Sambin, 21000 Dijon, France
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J. Alm, A. Malézieux
This research takes the form of an economic game. In general, each one of you will receive salary slips. You will be asked to report your income, and pay income tax on the income you reported. From time to time, audits will be conducted according to a random sample, and fines imposed on tax evaded. At the end of each “round” of 10 months, each person’s net income will be added up (gross income less income tax less fines). The objective of each person in the game is to accumulate the maximum amount of net income. Since 1978, this simple game has been the subject of well over 130 publications (Torgler 2016), with more papers added on a regular basis. This extensive use of TEGs has been driven by three main factors. First, there are compelling reasons to find ways to fight tax evasion, and laboratory experiments offer one way to examine these policy tools. Second, laboratory experiments generate observable and reliable data about individual tax evasion choices, information that is by nature very difficult to measure in the field. Third, laboratory experiments have a high de
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