Quotation Amberger, Harald, Eberhartinger, Eva, Kasper, Matthias. 2022. Tax-Rate Biases in Tax Decisions: Experimental Evidence. Journal of the American Taxation Association.


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Abstract

This study investigates biases in tax decisions. In a series of four laboratory experiments with 303 students and 62 tax professionals, we document a systematic tax-rate bias in decisions under time constraints. Specifically, decision-makers overestimate the relevance of less complex tax-rate information compared to more complex tax-base information. This behavior leads to suboptimal tax decisions. We also find that decision-making, on average, is unaffected by professional experience: students and tax professionals are similarly prone to tax-rate bias. However, senior tax professionals are more rationally inattentive. These decision-makers are less likely to exhibit a tax-rate bias when exhibiting such bias is relatively costly. Overall, our findings suggest that resource constraints impede the use of complex tax-base information, which results in suboptimal tax decisions. Interviews with senior tax professionals indicate potential for tax-rate biases in real-world tax decisions and thereby provide directions for future research.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of the American Taxation Association
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, WH-B
Language English
Title Tax-Rate Biases in Tax Decisions: Experimental Evidence
Year 2022
Reviewed? Y
URL https://meridian.allenpress.com/jata/article-abstract/doi/10.2308/JATA-2020-019/478693/Tax-Rate-Biases-in-Tax-Decisions-Experimental?redirectedFrom=fulltext
DOI https://doi.org/10.2308/JATA-2020-019
Open Access N

Associations

People
Amberger, Harald (Details)
Eberhartinger, Eva (Details)
External
Kasper, Matthias (Universit├Ąt Wien, Austria)
Organization
Business Taxation Group AB (Details)
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