Cash and the Hidden Economy: Experimental Evidence on Fighting Tax Evasion in Small Business Transactions
Journal of Business Ethics:1-26 (forthcoming)
AbstractIncreasing the tax compliance of self-employed business owners—particularly of trade-specific service providers such as those involved in construction and repair work—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 these exchanges are difficult to audit. We present experimental evidence testing ten different policy strategies rooted in the enforcement, service, and trust/social paradigms, in a setting that allows payment either via a transaction that directly reports income for tax collection purposes or in cash, where taxes are only collected on reported income. Our sample includes both a typical subject pool of students, as used in most previous studies, and non-students who are active within service industries characterised by the opportunity to engage in cash transactions. While our comparative results show that, for both student and non-student participants, interventions that rely on greater enforcement by the tax authority have the greatest effect on compliance in our cash economy setting, treatments involving cooperative elements may be similarly effective in enhancing tax compliance. Given their effectiveness, cooperative approaches should therefore be considered for addition to the policy mix if implemented at relatively low costs, making both carrot and stick approaches promising to increase compliance in an environment where cash-for-service payments offer a common benefit for small businesses and their customers from implicit collusion that enables tax evasion.
Similar books and articles
Do conditional cash transfer programs shift votes? Evidence from the Honduran PRAF.E. Linos - unknown
Re-Introducing The Concept of Mind.Daniel Dennett - 2002 - Electronic Journal of Analytic Philosophy 7.
The Influence Mechanism of Different Cash Flow Availability on R&D Investment: Evidence from China.Xiaobo Wu, Ye Hua & Hao Lu - 2022 - Complexity 2022:1-14.
Rationality Versus Emotions: The Case of Tax Ethics and Compliance. [REVIEW]Boris Maciejovsky, Herbert Schwarzenberger & Erich Kirchler - 2012 - Journal of Business Ethics 109 (3):339-350.
The level of the shadow economy, tax evasion and corruption: The empirical evidence for SEE countries.Rufi Osmani - 2015 - Seeu Review 11 (2):6-22.
CSR Performance and the Value of Cash Holdings: International Evidence.Mohamed Arouri & Guillaume Pijourlet - 2017 - Journal of Business Ethics 140 (2):263-284.
The Hidden Economy in Sudan Causes and Size.Howyda Tahir Hassan Taha & Abdel Muttalib Ali Ibnouf - 2018 - International Journal of Academic Accounting, Finance and Management Research (IJAAFMR) 3 (1):1-7.
Do Local Protestant Values Affect Corporate Cash Holdings?Huajing Hu, Yili Lian & Wencang Zhou - 2019 - Journal of Business Ethics 154 (1):147-166.
Is there Informational Value in Corporate Giving?Kiyoung Chang, Hoje Jo & Ying Li - 2018 - Journal of Business Ethics 151 (2):473-496.
The Effects of The Hidden Economy in Sudan And its Reduction Strategies.Abdel Muttalib Ali Ibnouf & Howyda Tahir Hassan Taha - 2019 - International Journal of Academic Accounting, Finance and Management Research (IJAAFMR) 3 (1):44-52.
Corporate Legitimacy and Investment–Cash Flow Sensitivity.Omrane Guedhami, Sadok El Ghoul, Sean W. Cleary & Najah Attig - 2014 - Journal of Business Ethics 121 (2):297-314.
The Sharing Economy in Practice in the Czech Republic: A Small Post-Communist Economy.Libena Tetrevova - 2021 - In Andrzej Klimczuk, Vida Česnuitytė & Gabriela Avram (eds.), The Collaborative Economy in Action: European Perspectives. University of Limerick. pp. 100-112.
Added to PP
Historical graph of downloads
Sorry, there are not enough data points to plot this chart.
Citations of this work
No citations found.
References found in this work
Science and human behavior.B. F. Skinner - 1954 - Revue Philosophique de la France Et de l'Etranger 144:268-269.
Do Ethics Matter? Tax Compliance and Morality.James Alm & Benno Torgler - 2011 - Journal of Business Ethics 101 (4):635-651.
The Effect of Interactional Fairness and Detection on Taxpayers’ Compliance Intentions.Linda Thorne, Steven Kaplan & Jonathan Farrar - 2019 - Journal of Business Ethics 154 (1):167-180.
The Effect of Interactional Fairness and Detection on Taxpayers’ Compliance Intentions.Jonathan Farrar, Steven E. Kaplan & Linda Thorne - 2019 - Journal of Business Ethics 154 (1):167-180.