Do Negative News Create Tax Evaders? Evidence from the Tax Compliance Experiment.
|Type||Article in Proceedings|
|Conference||Proceedings of the 20th International Conference Current Trends in Public Sector Research 2016.|
|MU Faculty or unit|
|Field||Management and administrative|
|Keywords||laboratory experiment; tax compliance; evasion; media; framing|
|Description||Tax evasion is perceived as one of the main problem of public finance. People tend to evade as they do not recognise return in public good provided by the state or local government. The rate of tax compliance might be on the other hand effected also by an external factor such as media who have great power on public opinion and mood of the society We conduct laboratory experiment to study whether framing of effectiveness of state spending influences participants´ decision to pay taxes. Using news headlines, subjects get the information on how state institutions are speeding their budget. Our results show that while positive news increases tax compliance comparing to control group, its effect is not statistically significant. On the other hand, negative news significantly increases tax evasion. Our main finding thus suggests that if people receive signals of ineffectiveness of state´s spending, their willingness to pay taxes considerably drops|