3263 - PROCESS TRACING AS A TOOL TO STUDY TAX COMPLIANCE

Session: 3136 - NEW AVENUES IN TAX RESEARCH
AUTHORS:
Kogler Christoph (Tilburg University ~ Tilburg ~ Netherlands)
Abstract text:
Previous studies (Kogler et al., 2016; Muehlbacher et al., 2012) suggest that delaying feedback on communicating the outcome of tax audits results in higher levels of tax compliance compared to immediate feedback. This is especially relevant since in experimental research on tax compliance audits occur typically directly after filing taxes, and feedback on the consequences of an audit is usually given immediately. In reality, however, audits happen within a much longer period of time. This difference in time lags between filing and audit (feedback) may play a crucial role with regard to the external validity of experimental results. In three incentivized lab experiments, we investigated the stability of the effect of delayed audit feedback on tax compliance by varying tax rates, audit probabilities, and fine rates, as these factors are known to have a strong influence on tax compliance. In addition, the process of information acquisition was recorded via decision times (Experiment 1), MouselabWeb (Experiment 2), and eye-tracking (Experiment 3). The results of all three experiments reveal that compliance in delayed feedback conditions was considerably higher than in case of immediate feedback. In addition, lower tax rates, higher audit probabilities, and higher fine levels resulted in higher tax compliance. Analysis of decision times showed that participants in conditions of delayed feedback took longer to decide, especially when they chose to evade. Concerning information acquisition, delayed feedback resulted in more frequent and longer acquisition of information on audit probability and fine rate compared to immediate feedback, both in the MouselabWeb as well as in the eye-tracking study. In combination with perceiving delayed feedback as more unfair - as indicated in post-experimental questionnaires - this pattern of results can be interpreted as an indication of "aversive uncertainty". Implications for tax research and policy-making will be discussed.