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Do Household Tax Credits Increase the Demand for Legally Provided Services?

Author

Listed:
  • Lilith Burgstaller
  • Annabelle Doerr
  • Sarah Necker
Abstract
We study the causal effects of household tax credits on the willingness to demand legally provided services using two survey experiments with 1.974 German homeowners. Participants choose between hypothetical offers of service providers and are randomly assigned to a policy scenario 1) without a tax credit, 2) a tax credit households can claim through the annual tax return, or 3) a tax credit granted by the seller at source. We also vary the refund rate of the tax credit (20/30%) and whether the price including the tax reduction is displayed. All tax credits increase the willingness to pay for offers with invoice as well as the probability to select an offer with invoice. The effectiveness of the tax credit is significantly higher when two attractive features (at source+30%) are combined or when the reduction is made salient. We estimate that about two thirds of respondents who would use the tax credit would have demanded an offer without invoice also without the tax credit.

Suggested Citation

  • Lilith Burgstaller & Annabelle Doerr & Sarah Necker, 2023. "Do Household Tax Credits Increase the Demand for Legally Provided Services?," CESifo Working Paper Series 10211, CESifo.
    • Handle: RePEc:ces:ceswps:_10211
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    References listed on IDEAS

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    Cited by:

    1. Ingar Haaland & Christopher Roth & Stefanie Stantcheva & Johannes Wohlfart, 2024. "Measuring What Is Top of Mind," CEBI working paper series 24-10, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    2. Baumgart, Eike & Blaufus, Kay & Hechtner, Frank, 2023. "The tax treatment of commuting expenses and job-related mobility," arqus Discussion Papers in Quantitative Tax Research 280, arqus - Arbeitskreis Quantitative Steuerlehre.

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    More about this item

    Keywords

    tax credit; financial rewards for compliance; tax evasion; tax compliance; third-party reporting; survey experiment; discrete choice experiment;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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