How to improve payroll tax compliance of small firms? Evidence from a randomized field experiment

Dörrenberg, Philipp ; Pfrang, Alina ; Schmitz, Jan

Document Type: Working paper
Year of publication: 2022
Place of publication: Rochester, NY
Publishing house: SSRN
Publication language: English
Institution: Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel 2006-)
Business School > ABWL u. Betriebswirtschaftliche Steuerlehre (Dörrenberg 2019-)
Subject: 330 Economics
Classification: JEL: H20 , H32 , H50 , C93,
Keywords (English): tax compliance , firms , audits , morale appeals , randomized field experiment
Abstract: Improving tax compliance of firms can substantially increase tax revenues. Cooperating with the Bulgarian tax authorities, we conducted a randomized field experiment to assess means for improving tax compliance of small firms in an emerging economy. We tested the effect of deterrence messages by randomizing the individual audit probability of firms (1%, 10%, 40% or 60%) and tested a novel form of moral appeals by varying information on the benefits of tax-financed public goods provided to firms. Our focus is on payroll taxes which is rarely studied in existing tax-compliance work. Using administrative tax return data with monthly frequency, we show that both deterrence measures and moral appeals significantly improve payroll tax compliance. The treatment effect of a high audit probability was approximately 50\% larger than the effect of moral appeals. Treatment effects in general were significantly larger for larger firms and in labor-intensive industries. Cost-benefit analysis shows that the experiment-induced tax revenue gains considerably outweighed the costs of the experiment.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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