The impact of public transfer expenditures on tax evasion: An experimental approach

Abstract

This paper outlines the methodology and results of an experiment undertaken to analyze, primarily, the impact of public sector transfer payments on tax-evasion behaviour. Apart from the use of transfer payments, further explanatory variables used were income, expected auditing probability and perceived tax burden. The influence of these variables on both the propensity to evade taxes and the extent of taxes evaded are investigated. In an attempt to add more ‘realism’, some innovative changes to the experimental approach were incorporated.