Tax-Rate Biases in Tax Decisions: Experimental Evidence
- Author(s)
- Harald J. Amberger, Eva Eberhartinger, Matthias Kasper
- 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.
- Organisation(s)
- Department of Occupational, Economic and Social Psychology
- External organisation(s)
- Dartmouth College, Wirtschaftsuniversität Wien (WU)
- Journal
- Journal of the American Taxation Association
- Volume
- 45
- Pages
- 7-34
- No. of pages
- 28
- DOI
- https://doi.org/10.2308/JATA-2020-019
- Publication date
- 03-2022
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 501029 Economic psychology
- Keywords
- ASJC Scopus subject areas
- Accounting, Finance
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/taxrate-biases-in-tax-decisions-experimental-evidence(aec7d643-fe8f-44ad-934f-2fd2b34e544b).html