Johann Graf Lambsdorff (University of Passau)

This week's seminar will be given by Johann Graf Lambsdorff form the University of Passau.

Title: When to Cheat?  - Balancing Tax Morale and Financial Gain

Abstract:
The intrinsic motivation to pay taxes is widely believed to diminish with levels of taxation and is ambiguously related to income. But is it absolute levels of taxation that matters or those relative to other taxpayers? And does it make a difference how income is earned? We run an experiment where subjects carry out a sequence of slider-tasks.

The income earned varies with skill, random luck and the exogenously given length of time. For each task subjects privately roll a die, whose value determines the tax rate, which is then reported by subjects. This provides subjects with an incentive to cheat. We vary the absolute level of taxation across treatments. Contrary to widespread belief, participants' cheating is invariant to the absolute level of taxation. It increases with the relative tax and across all measures of income. Our findings are instructive for advancing tax morale.