Cash and the hidden economy: Laboratory and artefactual field experimental evidence on fighting tax evasion in small business transactions

Arbeitspapier

Increasing the tax compliance of self-employed business owners (particularly of tradespecific service providers) remains an ongoing challenge for tax authorities. From a compliance point of view, cash transactions are particularly problematic when services are paid for on the spot, as such exchanges are difficult to audit. As a novelty we present experimental evidence testing 11 different policy strategies in a setting that allows for cash transactions. Our sample includes both students and non-students active in service industries characterised by the opportunity to engage in cash transactions. While our results offer a positive outlook for the interventions reporting a significant effect, they particularly speak to the potential of moral suasion to increase compliance, as it may be implemented at relatively low cost. However, a carrot (offering support in tax declarations) as well as a stick (increasing the threat of audits) approach may be promising for increased compliance, especially where there is an evasion opportunity in cash-for-service payments between small businesses and individual customers who may share a common benefit from tax evasion. A stick approach is particularly efficient for those inclined to use cash transactions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CREMA Working Paper ; No. 2021-01

Classification and Topics

• Classification: Wirtschaft
• Subject: Steuermoral ; Steuervermeidung ; Besteuerungsverfahren ; KMU ; Experiment ; Australien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chan, Ho Fai ; Dulleck, Uwe ; Fooken, Jonas ; Moy, Naomi ; Torgler, Benno
• Event: Veröffentlichung
• (who): Center for Research in Economics, Management and the Arts (CREMA)
• (where): Zürich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/234616
• Last update: 10.03.2025, 11:43 AM CET