Shaping Tax Norms Through Lotteries

Posted: 18 Jan 2013 Last revised: 3 Dec 2015

See all articles by Marco Fabbri

Marco Fabbri

University Pompeu Fabra, Department of Business and Economics; University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)

Date Written: June 13, 2013

Abstract

The aim of this work is to explain the success registered by a zero-cost policy against sales tax evasion based on a lottery mechanism which has been recently implemented in a growing number of countries. It is suggested how the specific sales tax evasion situation in which this policy has been applied could be traced back to a general public goods framework. After a discussion of the empirical evidences showing the policy success, we propose a theoretical model incorporating Tversky and Kahneman’s (1992) Cumulative Prospect Theory insights. Furthermore, a test for verifying the applicability of the lottery ticket policy in specific contexts is developed. Such a test could represent a useful ex-ante indicator of the expected success of the lottery ticket policy for policymakers interested in increasing the private provision of public goods.

Keywords: Public Goods, Tax Evasion, Law and Economics, Rewards, Lottery, Natural Experiment, Prospect Theory

JEL Classification: H26, H41, K34

Suggested Citation

Fabbri, Marco, Shaping Tax Norms Through Lotteries (June 13, 2013). International Review of Law and Economics, Vol. 44, pp 8-15, 2015, Available at SSRN: https://ssrn.com/abstract=2202189 or http://dx.doi.org/10.2139/ssrn.2202189

Marco Fabbri (Contact Author)

University Pompeu Fabra, Department of Business and Economics ( email )

Barcelona
Spain

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

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