Ritwik Banerjee on the link between corruption and tax evasion - an experimental investigation

Ritwik Banerjee will present at the WIDER Seminar Series on 10 May 2019. 

Abstract – The link between corruption and tax evasion - an experimental investigation

Developing countries are typically characterized by “hard-to-tax” sectors due the lack of information on revenues. This lack of information poses substantial enforcement problems and provides ample opportunity for tax non-compliance.  In such a context, voluntary tax compliance can be instrumental for increased revenue mobilization. The aim of this paper is to study the relationship between tax compliance and corruption, first, by using survey based data on tax evasion and corruption and then by using a controlled laboratory experiment. In the laboratory experiment, we design treatments where we examine whether 1) tax evasion increases with possibilities of Public Official's corruption and 2) corruption increases with the possibility of a Citizen's tax evasion.  In three additional experimental treatments, we analyze the effects of monitoring and punishment as an anti-tax evasion measure when the target is i) tax evasion, ii) corruption, or iii) both tax evasion and corruption. Results show that Citizens are less likely to comply if they see the possibility that the tax revenue may be embezzled and Public Officials are more likely to steal if they think Citizens are likely to evade taxes. However, we do not find that penalty on only tax evasion reduces corruption. Neither do we find that penalty on corruption reduces tax evasion. 

About the speaker

Ritwik Banerjee is an Assistant Professor at the Economics and Social Science area at Indian Institute of Management Bangalore. Currently, he is on leave from IIM Bangalore and is a visiting scholar at UNU-WIDER, Helsinki, Finland.

His primary research area is at the intersection between Behavioural and Development Economics and he extensively uses Experimental Methods for his research. Some of the topics he has investigated or is currently investigating are corruption, inequality, education and discrimination. His research has been published in peer-reviewed journals such as Economics Letters and Journal of Public Economics. Prior to his current assignment, he has worked as Post Doctoral Research Fellow, Aarhus University, Denmark with an independent grant from the Social Science Research Council of Denmark. He was an Academic Visitor at the Research Department of Federal Reserve, Chicago during the summer of 2012 and a Visiting Scholar at the Economics Department, Harvard University in Spring 2015. He has also served as a Consultant at the World Bank in Washington DC and as a Research Associate at ICRIER, New Delhi.

WIDER Seminar Series

The WIDER Seminar Series showcases recent and ongoing work on key topics in development economics. The weekly sessions held in Helsinki are open to local and visiting researchers, policy makers, and others interested in development topics. Click here to learn more.

Seminars will be live streamed on Facebook and recordings and presentations will be available after the event here.

For more information email richardson@wider.unu.edu