CMSSE Public Research Seminar. A report by Alexey Belyanin.
On May 10, 2013, CMSSE was held the public research seminar. Report on the theme "Tax compliance and trust to the government: cross-country experimental study" by Alexey Belyanin (PhD, Associate Professor at HSE).
On May 10, 2013, 11:00.
Public research seminar.
Alexey Belyanin (PhD, Associate Professor at HSE). "Tax compliance and trust to the government: cross-country experimental study".
The paper explores the relative importance of the two main determinants of tax compliance: power of the government to enforce tax discipline, and public trust to the government. We study the relative importance of observable and latent role of power and especially trust by means of a cross-country experiment in six different countries: Austria, Hungary, Italy, South Africa, Romania and Russia. In our experiment, power is exogenous to behaviour, while trust is endogenous to government actions, as well as to the beliefs of fellow citizens about public disconsent of the government. This setup allows to investigate whether power or trust are more substantial determinant of tax compliance, and the extent to which public trust may be due to government's relative trustworthiness vs. failure of taxpayers' coordination to put the government under civil control.
Our experimental setup develops the classical taxation experiments (Alm e.a., 1992), and consists of three stages of 10 periods each. In stage 1, participants are asked to pay tax at 33% of their income, without any control. In stage 2, one of the players is elected to take the role of government who checks proper tax payments of 2 out of the remaining 7 taxpayers, fines the evaders and takes uncontrolled remuneration for its service from the public money. Finally, in stage 3, citizens may put the government under endogenous control by investment up to additional 5 units in a special control fund (a `second-order public good') whose function is to restrict the remuneration of the government. Results of the experiment show that introduction of monitoring (government player) is an efficient way to boost tax discipline, although to different extent in different countries. By contrast, control fund remains an underutilized device, which is largely driven by the fact that governments were taking only moderately larger remuneration than authorised by the Law. Comparison of treatment effects across countries, as well as structural estimates of the elasticities of substition between public and private goods using nested partial maximum likelihood reveals significant cross-country differences between the ‘prosocial' samples (South Africa and Austria) and mistrustful countries (Romania and Russia). These results support the 'slippery slope' (Kirchler, 2007) hypothesis, as well as connect the observable tax compliance rates to social preferences, risk attitudes and social value orientations (SVO) across countries.
The address of the seminar: Conference-hall (3rd floor), b. 47, pr. Rimskogo-Korsakova, Saint Petersburg.