Why we Cheat: Evidence from Tax Compliance Experiments

Raymond Duch

We conduct tax compliance experiments in which subjects earn real money, are subject to a tax, and can lie about their earnings. Performing better on incentivized real effort tasks results in more cheating. Cheating rises as the tax rate increases; but the higher levels of cheating by those who excelled at the tasks persists in high and low tax treatments. This correlation persists when earnings are associated with luck; the correlation persists in experimental treatments with more redistributive taxation. The correlation persists for choices made in other games by the same subjects: high performance types give less in a conventional Dictator Game and also cheat more in a classic die game in which they privately report the results of tossing a die.

Replication data: https://github.com/rayduch/Why-we-Cheat-2016

Paper: http://www.raymondduch.com/wp-content/uploads/2016/11/Why-we-Cheat-November-2016.pdf