The Effect of Public Disclosure on Reported Taxable Income: Evidence from Individuals and Corporations in Japan

45 Pages Posted: 6 Aug 2010 Last revised: 25 Mar 2012

See all articles by Makoto Hasegawa

Makoto Hasegawa

Graduate School of Economics, Kyoto University

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Ryo Ishida

Ministry of Finance - Japan - Policy Research Institute

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: March 12, 2012

Abstract

The behavioral response to public disclosure of income tax returns figures prominently in policy debates about its advisability. Although supporters stress that it encourages tax compliance, policy debates proceed in the absence of empirical evidence about this, and any other, claimed behavioral impact. This paper provides the first such evidence by examining the behavioral response to the Japanese tax return public notification system. The analysis suggests that, when there is a threshold for disclosure, a non-trivial number of both individual and corporate taxpayers whose tax liability would otherwise be close to the threshold will underreport so as to avoid disclosure, provoking a response of the opposite direction than what supporters stress. An analysis of corporations’ financial data offers no evidence that these companies’ taxable income declined after the end of the disclosure system.

Keywords: Tax disclosure, Japanese income tax, Japanese economy

JEL Classification: H26

Suggested Citation

Hasegawa, Makoto and Hoopes, Jeffrey L. and Ishida, Ryo and Slemrod, Joel B., The Effect of Public Disclosure on Reported Taxable Income: Evidence from Individuals and Corporations in Japan (March 12, 2012). Available at SSRN: https://ssrn.com/abstract=1653948 or http://dx.doi.org/10.2139/ssrn.1653948

Makoto Hasegawa

Graduate School of Economics, Kyoto University ( email )

Yoshida-Honmachi, Sakyo-ku
Kyoto, 606-8501
Japan

HOME PAGE: http://sites.google.com/view/makoto-hasegawa/

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Ryo Ishida

Ministry of Finance - Japan - Policy Research Institute ( email )

Kasumigaseki Chiyoda-ku
3-1-1
Tokyo, 100-8940
Japan

Joel B. Slemrod (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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