The whistleblowing mechanism and tax evasion: an experimental study with private income-level information

ABSTRACT

This paper uses the laboratory experiment to examine the effect of whistleblowing in the context of tax evasion when individual income level is private information. According to the experimental result, it shows that the whistleblowing mechanism effectively mitigates tax evasion.

KEYWORDS:

• Whistleblowing
• tax evasion
• private information
• laboratory experiment

JEL CLASSIFICATION:

• H26
• C91
• D82

Acknowledgments

The author thanks two anonymous referees’ comments and suggestions. The author also thanks Liang-Lin Pan for help in running the experiment. Financial support is provided by the National Taipei University (110HA1902).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The criteria and basis for the classification of risk preference strictly follows Dave et al. (2010). Please refer to pages 224–225 in Dave et al. (2010).

² It is about USD 9.12.

³ Let $d_i$ represent subject i’s declared income and $D_{-i}$ be the average declared income of other group members, positive deviation is defined as $\underset{\hspace{0.17em}}{max}\left\{d_i-D_{-i},0\right\}$ and absolute negative deviation is defined as $\underset{\hspace{0.17em}}{max}\left\{D_{-i}-d_i,0\right\}$.

Additional information

Funding

This work was supported by the National Taipei University [110HA1902].