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  3. American Economic Journal: Economic Policy
  4. November 2015
  5. Tax Compliance and Loss Aversion

American Economic Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

Tax Compliance and Loss Aversion

  • Per Engström
  • Katarina Nordblom
  • Henry Ohlsson
  • Annika Persson
American Economic Journal: Economic Policy
vol. 7, no. 4, November 2015
(pp. 132–64)
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Abstract

We study if taxpayers are loss averse when filing returns. Preliminary deficits might be viewed as losses assuming zero preliminary balances as reference points. Swedish taxpayers can to try to escape such losses by claiming deductions after receiving information about the preliminary balance. Using a regression kink and discontinuity approach, we study data for 3.6 million Swedish taxpayers for 2006. There are strong causal effects of preliminary tax deficits on the probability of claiming deductions. Compliance will increase and auditing costs will be reduced if preliminary taxes are calibrated so that most taxpayers receive refunds. (JEL H24, H26)

Citation

Engström, Per, Katarina Nordblom, Henry Ohlsson, and Annika Persson. 2015. "Tax Compliance and Loss Aversion." American Economic Journal: Economic Policy, 7 (4): 132–64. DOI: 10.1257/pol.20130134

Additional Materials

JEL Classification

  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • H26 Tax Evasion and Avoidance
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