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Taxation with Mobile High-Income Agents: Experimental Evidence on Tax Compliance and Equity Perceptions

1
Department of Economics and Management, University of Trento, via Inama 5, 38122 Trento, Italy
2
Department of Economics, University of Erlangen-Nuremberg, Lange Gasse 20, 90403 Nürnberg, Germany
*
Author to whom correspondence should be addressed.
Games 2019, 10(4), 42; https://doi.org/10.3390/g10040042
Received: 9 September 2019 / Revised: 1 October 2019 / Accepted: 4 October 2019 / Published: 11 October 2019
(This article belongs to the Special Issue Empirical Tax Research and Application)
In a laboratory experiment on tax compliance, we model a situation in which high-income taxpayers can leave a tax system that finances a public good. We compare low-income taxpayers’ compliance decisions and equity perceptions across treatments in which they are informed or not informed about the mobility option of high-income taxpayers. This allows us to test if low-income taxpayers regard the mobility option as a rationale for implementing a regressive tax schedule. To investigate if a potential ‘justification effect’ of the mobility option depends on the causes of income heterogeneity, we also varied whether income was allocated based on relative performance in a prior ability task or at random. Interestingly, although the performance-based allocation itself was judged to be fairer, we observed higher compliance under the random allocation mechanism. However, compliance and equity perceptions did not significantly differ by the information treatment variation, regardless of the source of income inequality. The results indicate that the threat of losing high-income taxpayers’ contributions does not lead low-income taxpayers to view the regressive tax schedule more favorably. This suggests that taking the differential mobility options as given and altering tax schedules accordingly may not be perceived as an adequate policy response. View Full-Text
Keywords: tax compliance; mobility; heterogeneous income; optimal taxation; fairness perceptions; laboratory experiment tax compliance; mobility; heterogeneous income; optimal taxation; fairness perceptions; laboratory experiment
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Casal, S.; Grimm, V.; Schächtele, S. Taxation with Mobile High-Income Agents: Experimental Evidence on Tax Compliance and Equity Perceptions. Games 2019, 10, 42.

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