The authors analyze data from a randomized controlled trial of two innovative anti-tax evasion schemes in Ethiopia that signal threats of audit and complimentary messages that encourage tax morale. Their results indicate that the threat of audit reduces tax evasion significantly, and its effect is higher in businesses commonly suspected of high tax evasion rates. They also find that appealing to the tax morale promotes compliance but slightly less than that of audit threat. Their results are robust to different estimation strategies and less sensitive to potential confounding factors.
This work is part of the ‘Macroeconomics in Low-income countries’ programme
Shimeles, Abebe, Daniel Zerfu Gurara, and Firew Woldeyes. 2017. ”Taxman’s Dilemma: Coercion or Persuasion? Evidence from a Randomized Field Experiment in Ethiopia.” American Economic Review, 107 (5): 420-24.DOI: 10.1257/aer.p20171141
Taxman’s Dilemma: Coercion or Persuasion? Evidence from a Randomized Field Experiment in Ethiopia