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Mind the gap. Who evades VAT and by how much?

Last registered on January 27, 2023

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Pre-Trial

Trial Information

General Information

Title

Mind the gap. Who evades VAT and by how much?

RCT ID

AEARCTR-0010699

Initial registration date

January 17, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

January 27, 2023, 1:07 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Region

Primary Investigator

Name

Davud Rostam-Afschar

Affiliation

University of Mannheim

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

PI Affiliation

ZEW Mannheim

Contact Investigator

PI Name

Philipp Dörrenberg

PI Affiliation

University of Mannheim

Contact Investigator

PI Name

PI Affiliation

University of Mannheim

Contact Investigator

Additional Trial Information

Status

In development

Start date

2022-10-03

End date

2023-04-30

Keywords

Behavior, Crime, Violence, & Conflict, Firms & Productivity, Governance

Additional Keywords

Tax evasion, Shadow economy, Randomized Response Technique

JEL code(s)

H25, H26, E26, O17, C83

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

VAT tax evasion erodes government budgets available for public goods, is a source of unfair competition, and exposes individuals to exploitative work conditions. The prevalence of VAT evasion and its determinants are difficult to study, because of its illegal nature. Our objective in this study is to identify the share of firms in Germany that have ever evaded VAT tax. We implement the randomized response technique in a sample of firm decision makers active in Germany. Additional information on the position in the value chain and the firm's industry allows us to compare the occurrence of VAT evasion across parts of the firm population that differ in their firm characteristics and scope of activity. We supplement the results on the prevalence of tax evasion with estimates of its quantitative importance using the indirect questioning technique. The results will provide important insights into the mechanics of tax evasion and valuable starting points for a refined discussion of policy measures to combat this phenomenon.

External Link(s)

Registration Citation

Citation

Dörrenberg, Philipp et al. 2023. "Mind the gap. Who evades VAT and by how much?." AEA RCT Registry. January 27. https://doi.org/10.1257/rct.10699-1.0

Sponsors & Partners

Sponsors

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Experimental Details

Interventions

Intervention(s)

Intervention Start Date

2023-01-18

Intervention End Date

2023-04-30

Primary Outcomes

Primary Outcomes (end points)

- share of respondents who have evaded VAT
- magnitude VAT evasion

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

Experimental Design

The experiment is designed as a combination of a between and within subjects treatment.

The randomization assigns 12.5% of respondents to a control group, that forces a response. 1-2(1/2)^4=87.5% of respondents may answer truthfully.

The between subjects component compares the proportion of respondents that indicate having evaded VAT beyond the control group. That is, the causal effect is the difference between the number of respondents who answer yes in the control treatment arm compared to the number of respondents who answer yes in the free responses treatment arm. The treatment works via the anonymity given by the randomization device. This effectively blinds the treatment allocations to avoid underreporting bias. A well-blinded RCT is considered the gold standard for clinical trials but is less known in economic applications.

The within subjects component then investigates how those who answered with yes in the first question respond to a subsequent question that uses the indirect questioning technique. The indirect questioning technique asks about the behavior of a competitor.

Experimental Design Details

Randomization Method

We implement a randomized response technique (RRT) forced response design in a Computer Assisted Telephone Interview (CATI) survey in Germany. The survey experiment is carried out by the partner company uzbonn independently. As a randomization device, we ask respondents to use three coins (or if not available an online coin toss on https://zufallsgenerator.org) but not tell the outcome to the interviewer. The coin tosses determine whether the participant answeres the sensitive question or is forced to answer ‘Yes’ Or ’No’.

The respondent is requested to
- always answer ‘Yes’, irrespective of the truthfulness of the response, if she has received three tails,
- always answer ‘No’, irrespective of the truthfulness of the response, if she received three heads,
- answering truthfully ‘Yes’ or ‘No’, if she received a combination of heads and tails.

The probability of getting three times head or tails is 0.5x0.5x0.5=12.5%. The probability of getting a combination of head and tails is 1-0.125=87.5%. That is, the treatment arm with a forced answer is assigned to 12.5% of respondents, the treatment arm with the potential to answer truthfully is assigned to 87.5% of respondents.

Randomization Unit

individual firm representative

Was the treatment clustered?

No

Experiment Characteristics

Sample size: planned number of clusters

no clustering

Sample size: planned number of observations

1500 firm representatives

Sample size (or number of clusters) by treatment arms

The randomization assigns respondents to two treatment arms: 12.5% of respondents are assigned to a forced response, 87.5% are assigned to a treatment arm that allows a truthful response.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

Institutional Review Boards (IRBs)

IRB Name

IRB Approval Date

IRB Approval Number

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Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?

No

Data Collection Complete

Data Publication

Data Publication

Is public data available?

No

Program Files

Program Files

Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials