An Economic Model of Tax Compliance with Individual Morality and Group Conformity

Scholars in public finance traditionally have analyzed tax compliance using the Allighman-Sandmo model. I include in this model both moral and social payoffs for compliance. This approach can explain four pieces of evidence that have not been explained by the traditional model, namely i) high level of tax compliance; ii) honest responses when individuals pay their taxes, even in the presence of high incentives for tax evasion; iii) the level of evasion increases with the tax rate; and iv) individuals are more likely to evade when they realize that there is a large number of evaders in society.tax compliance, evasion, social norms, honesty, moral values, social interaction.

Group Decision-Making and Voting in Ultimatum Bargaining: An Experimental Study

Many rent-sharing decisions in a society result from a bargaining process between groups of individuals (such as between the executive and the legislative branches of government, between legislative factions, between corporate management and shareholders, etc.). We conduct a laboratory study of the effect of different voting procedures on group decision-making in the context of ultimatum bargaining. Earlier studies have suggested that when the bargaining game is played by unstructured groups of agents, rather than by individuals, the division of the payoff is substantially affected in favor of the ultimatum-proposers. Our theoretical arguments suggest that one explanation for this could be implicit voting rules within groups. We explicitly structure the group decision-making as voting and study the impact of different voting rules on the bargaining outcome. The observed responder behavior is consistent with preferences depending solely on payoff distribution. Furthermore, we observe that proposers react in an expected manner to changes in voting rule in the responder group.Bargaining games, group decision making and experimental design.

Group Decision-Making in Ultimatum Bargaining: An Experimental Study

Many rent-sharing decisions in a society are result from a bargaining process between groups of individuals (such as between the executive and the legislative branches of government, between legislative factions, between corporate management and shareholders, etc.). The purpose of this work is to conduct a laboratory study of the effect of different voting procedures on group decision-making in the context of ultimatum bargaining. An earlier study (Bornstein and Yaniv, [2]) has suggested that when the bargaining game is played by unstructured groups of agents, rather than by individuals, the division of the payoff is substantially affected in favor of the ultimatum-proposers. Our theoretical arguments suggest that one explanation for this could be implicit voting rules within groups. We propose to explicitly structure the group decision-making as voting and study the impact of different voting rules on the bargaining outcome.Bargaining games, group decision making and experimental design

Group Decision-Making and Voting in Ultimatum Bargaining: An Experimental Study

Many rent-sharing decisions in a society result from a bargaining process between groups of individuals (such as between the executive and the legislative branches of government, between legislative factions, between corporate management and shareholders, etc.). We conduct a laboratory study of the effect of different voting procedures on group decision-making in the context of ultimatum bargaining. Earlier studies have suggested that when the bargaining game is played by unstructured groups of agents, rather than by individuals, the division of the payoff is substantially affected in favor of the ultimatum-proposers. Our theoretical arguments suggest that one explanation for this could be implicit voting rules within groups. We explicitly structure the group decision-making as voting and study the impact of different voting rules on the bargaining outcome. The observed responder behavior is consistent with preferences depending solely on payoff distribution. Furthermore, we observe that proposers react in an expected manner to changes in voting rule in the responder group.Bargaining games, group decision making and experimental design.

Rentabilidad del gasto para la fiscalización del IVA en México: un punto de partida para la reforma administrativa del Sistema de Administración Tributaria

The low levels of tax revenues in the developing countries have limited the capacity of their governments to redistribute income, provide public goods and generate economic growth. According to Dubin, Graetz y Wilde (1990), tax revenues will increase if the government increases the enforcement spending. However, if the return of the enforcement spending is low, it might be better to increase the severity of the penalties and sanctions, since it accounts for minor costs. Therefore, only when we know the yield of the enforcement spending in terms of tax revenues we can decide to what extent it will be profitable to raise the amount of resources devoted to enforce tax compliance. This is relevant for any developing country, where the scarcity of the resources is greater than in developed countries. The paper estimates the return of the enforcement spending in terms of VAT revenues for the case of Mexico, using the model of Engel, Galetovic, y Raddatz (2001). The results are compared to the case of Chile. To our knowledge, there is no evidence of any work that has made this kind of analysis for the case of Mexico. The differences between the return of the enforcement spending in these two countries is explained by the gap in the administrative efficiency between the SII (Internal Tax System in Chile) and SAT (agency that is in charge of the tax administration in Mexico). There is a lot to learn from the Chilean experience: at the beginning of the nineties in Chile, VAT evasion was approximately 30 percent, while at the end of the decade this rate dropped to 18.3 percent. This goal was achieved through improvements both in enforcement and in the administrative efficiency of the SII. In fact, administration expenditure as a percentage of net tax revenues in Chile, in 1998, was lower than in many other OECD countries: it accounted for 0.73 percent. The paper provides some suggestions to improve tax administration in Mexico according to the latest modifications, both in the law and in the practice, during the Fox administration. The results of this paper represent the starting point in the debate about how to construct an administrative reform to increase both SAT's internal and external efficiency

El sistema de transferencias federales en México: Premio o castigo para el esfuerzo fiscal de los gobiernos locales urbanos

In the last years, Latin America has been immersed in a process of great democratic openness that generated a demand for more fiscal decentralization. Within this subject, this paper has the goal of contributing to the discussion on tax responsibilities devolution to local governments. Therefore, and for the first time in literature, the collecting effort of 155 municipalities in Mexico during 1993-200 is analyzed. It is found that, both non-conditional and conditional transfers (ramos 26 and 33) have had a negative impact in all local governments. Likewise, differences in fiscal performance are observed when they are grouped by size. The results show that the transfer policy has depleted more the tax effort of large local governments than those of the small ones, and that middle municipalities have shown a better performance. That is, there are differences in fiscal performance between equal size governments. The main lesson is that policies cannot be generalized according to the size of local government—municipalities are so diverse that, in fact, diversity must guide the design of the fiscal decentralization policy in Mexico

Cumplimiento fiscal y bienes públicos: ¿Son realmente compatibles?

This work provides experimental evidence of the determinants of tax compliance in Mexico, and compares them to the results of an experiment administered in the United States reported by Alm, Jackson and McKee (1992). The results for both countries are contrasted to the predictions of the Alligham-Sandmo model, whose basic assumption is that the probability of being detected cheating taxes is exogenous and independent of the level and type of income reported. Specifically, in both experiments, increasing the probability of audit always increases compliance; higher penalty rates are ineffective to increase compliance; there is a negative relationship between tax rates and compliance; but there was free riding in the public goods sessions in Mexico, even when the government is efficient providing them

The Flypaper Effect in Mexican Local Governments.

In this paper, we present evidence of the flypaper effect on uncondi- tional transfers in the Mexican municipalities during the 1990 to 2007 period. Using panel data, we also confirm an asymmetric effect. That is, authorities increase expenditures by a greater amount in response to an increase in transfers than the amount by which they reduce ex- penditures in response to a decrease in transfers (Gamkhar, 2000). These results are particularly relevant in light of the discussion that has developed in recent years about the need for a reform on the fiscal federalism in the country

Rentabilidad del gasto para la fiscalización del IVA en México: un punto de partida para la reforma administrativa del Sistema de Administración Tributaria

The low levels of tax revenues in the developing countries have limited the capacity of their governments to redistribute income, provide public goods and generate economic growth. According to Dubin, Graetz y Wilde (1990), tax revenues will increase if the government increases the enforcement spending. However, if the return of the enforcement spending is low, it might be better to increase the severity of the penalties and sanctions, since it accounts for minor costs. Therefore, only when we know the yield of the enforcement spending in terms of tax revenues we can decide to what extent it will be profitable to raise the amount of resources devoted to enforce tax compliance. This is relevant for any developing country, where the scarcity of the resources is greater than in developed countries. The paper estimates the return of the enforcement spending in terms of VAT revenues for the case of Mexico, using the model of Engel, Galetovic, y Raddatz (2001). The results are compared to the case of Chile. To our knowledge, there is no evidence of any work that has made this kind of analysis for the case of Mexico. The differences between the return of the enforcement spending in these two countries is explained by the gap in the administrative efficiency between the SII (Internal Tax System in Chile) and SAT (agency that is in charge of the tax administration in Mexico). There is a lot to learn from the Chilean experience: at the beginning of the nineties in Chile, VAT evasion was approximately 30 percent, while at the end of the decade this rate dropped to 18.3 percent. This goal was achieved through improvements both in enforcement and in the administrative efficiency of the SII. In fact, administration expenditure as a percentage of net tax revenues in Chile, in 1998, was lower than in many other OECD countries: it accounted for 0.73 percent. The paper provides some suggestions to improve tax administration in Mexico according to the latest modifications, both in the law and in the practice, during the Fox administration. The results of this paper represent the starting point in the debate about how to construct an administrative reform to increase both SAT's internal and external efficiency