Tax evasion and income source: A comparative experimental study

Klarita Gërxhani*, Arthur Schram

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We compare tax evasive behavior in a country in transition from communism to that in a developed economy by running an experiment across distinct social groups in Albania and the Netherlands. Aside from the tax compliance decision, subjects choose a source of income, where one type enables subsequent tax evasion. We show that they take the possibility of evasion into account when deciding on the income source. This yields potential allocative inefficiency in the labor market. In addition, Dutch subjects evade more than the Albanians. We argue that the different levels of tax evasion outside of the laboratory in the two types of countries can be attributed to distinct formal tax institutions.

Original languageEnglish
Pages (from-to)402-422
Number of pages21
JournalJournal of Economic Psychology
Volume27
Issue number3
DOIs
Publication statusPublished - Jun 2006
Externally publishedYes

Keywords

  • Comparative analysis
  • Experiment
  • Institutions
  • Tax evasion
  • Transition

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