Tax-Rate Biases in Tax Decisions: Experimental Evidence

Amberger, Harald and Eberhartinger, Eva and Kasper, Helmut (2020) Tax-Rate Biases in Tax Decisions: Experimental Evidence. WU International Taxation Research Paper Series, 2016-01. WU Vienna University of Economics and Business, Universität Wien, Vienna.


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This paper investigates how decision biases affect individuals’ tax decisions. We conduct four laboratory experiments with 303 students and 62 experienced tax professionals and find a systematic tax-rate bias in decisions under time constraints. More specifically, decision makers overestimate the relevance of less complex tax-rate information compared to more complex tax-base information, leading to suboptimal decision-making. We also find support for the theory of rational inattention as increasing the size of the tax-base effect mitigates the decision bias. However, we find that tax decisions are unaffected by participants’ professional experience: Students and highly experienced tax professionals are similarly prone to biased decision-making. Overall, our findings suggest that time constraints impede the use of complex information which can result in suboptimal tax planning.

Item Type: Paper
Additional Information: Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna).
Keywords: heuristics, decision bias, salience, tax-rate information, rational inattention
Classification Codes: JEL C91, D03, H32, K34, M21, M41
Depositing User: ePub Administrator
Date Deposited: 01 Mar 2016 12:12
Last Modified: 12 May 2020 10:27


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