Taxman's Dilemma: Coercion or Persuasion? Evidence from a Randomized Field Experiment in Ethiopia

Abebe Shimeles; Daniel Zerfu Gurara; Firew Bekele Woldeyes

doi:10.1257/aer.p20171141

Taxman's Dilemma: Coercion or Persuasion? Evidence from a Randomized Field Experiment in Ethiopia

Abebe Shimeles¹; Daniel Zerfu Gurara²; Firew Bekele Woldeyes³

¹ Development Research Department, African Development Bank, Av. Joseph Anouma Plateau 01, BP 1387 Abidjan Côte d'Ivoire (e-mail: ) · ² Strategy, Policy and Review Department, International Monetary Fund, 700 19th Street NW, Washington, DC 20431 (e-mail: ) · ³ Ethiopian Development Research Institute, Addis Ababa, Ethiopia (e-mail )

American Economic Review 2017 open access

We 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. Our 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. We also find that appealing to the tax morale promotes compliance but slightly less than that of audit threat. Our results are robust to different estimation strategies and less sensitive to potential confounding factors.

DOI: 10.1257/aer.p20171141
Volume: 107 (5)
Pages: 420-424
Language: en
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Sources: crossref openalex