Table1:DescriptiveStatistics

Noinformationtreatment Partialinformationtreatment Fullinformationtreatment

Periods Periods Periods
All Firstfive Lastfive All Firstfive Lastfive All Firstfive Lastfive
36.78 25.07 42.95 41.66 23.90 53.98 38.61 17.64 52.33
Taxevasion(in%)
(41.40) (35.75) (44.02) (44.15) (34.37) (46.16) (41.73) (28.27) (44.54)

Hightaxevasion 25.28 14.44 33.33 32.99 13.06 46.94 25.83 6.30 41.11

(in%) (43.48) (35.20) (47.21) (47.03) (33.74) (49.98) (43.79) (24.33) (49.29)

AuditProbability 23.09 17.50 28.99 25.39 19.07 29.23 25.44 17.49 31.56

(in%) (20.09) (16.07) (21.73) (21.38) (16.00) (22.73) (20.56) (15.87) (23.26)

FinalProfit(in) 9.94(1.06) 10.03(1.24) 9.99(0.72)

Females 62.5 52.8 57.4

Age 22.26(2.59) 22.17(2.33) 22.07(2.33)

Economic
63.9 70.8 70.4
Students

RiskAversion 5.26(2.63) 5.38(1.83) 5.02(2.31)

Subjects 72 72 54
Valuesshownabovearemeanswithstandarddeviationsinparentheses.Hightaxevasioncoverseverytaxevasionofatleast20(ofatmost
22.5)Cents.Subjectsfinalprofitistheirtotalexperimentalwealthaccumulatedover20rounds.Riskaversionwasmeasuredbasedupon
Holt and Laury (2002). Subjects were given 10 paired lotterychoice decisions. Risk aversion is the average number of decisions subjects
madeinfavoroftheriskfreealternative.Amoredetailedoverviewonthemeasureofriskaversion,aswellastheothervariables,isgivenin
AppendixB.Thelastrowsimplyshowsthenumberofsubjectspertreatment.

16

B Panel analysis

AsnotedinSection4.1,atotalof198studentsparticipatedinexperimentalsessionscomprising20

roundseach,resultingin19820=3960observations.Subjectscannotevadelessthan0ormorethan

22.5.Hence,taxevasionisboundedbetween0and22.5Therefore,weapplyatwosidedcensored

randomeffectsTobittypeIpanelmodelonourdata.Hence,ourmodelisgivenby

where 1, , 198and 1, ,20. The random effects are ~ 0, i.i.d and ~ 0,

i.i.disindependentof .Theobservedvariableis

0, if

, if 0 22.5

22.5, if 22.5

The regressor matrix is given by and includes indicator variables for the partial and the full

information treatment, gender, subject of study, risk aversion and income. The no information

treatment (full anonymity) is the baseline treatment. In the partial information treatment, public

disclosureisanonymous;inthefullinformationtreatment,realpublicdisclosureoccurs.Theother

modelvariablesarebrieflydescribedinsection4.1.Asinsection4.1welookattheoverallresultsas

wellasthefirstandlastfiveperiodsonly.TheresultsaregiveninthefirstthreecolumnsofTable3.

InadditiontotheTobitmodel,weapplyarandomeffectsProbitmodeltoexaminehightaxevasion.

Thismodelisgivenby

Pr 1| ,

where equals1inthecaseofhightaxevasion. isthestandardnormalcumulativedistribution

function.Therandomeffects aredefinedasintheTobitmodel,whereas is ~ 0, 1 i.i.d.and

againindependentof .Theregressormatrixisagaingivenby andincludesthesamevariables

asintheTobitmodel.

17

The descriptive results are largely confirmed by the Tobit and the Probit regression: across all 20

periods, tax evasion increases with decreasing tax privacy. The coefficients of both the partial and

the full information treatments are positive, but only the coefficient of the partial information

treatmentis significant.Becausedisclosureisanonymousinthe partialinformation treatment,the

strongeffectofthistreatmentcanonlystemfromthesimpleobservationofothersbehavior,i.e.,a

contagioneffect.Asinourdescriptiveresults,thedifferenceintaxevasionbetweenthebaselineand

the full information treatments is not significant, indicating that shame is not strong enough to

overridethecontagioneffect.Thisisfurthersupportedbythefactthatthedifferencebetweenthe

two information treatment coefficients is not significant (Tobit: Wald, 0.41 , Probit:

Wald p=0.50). Similarly, for the first and the last five periods the multivariate results match the

descriptive results. The existence of a shame effect can be shown only in the first five periods.

However,incontrasttothedescriptiveresults,theeffectissignificantonlyforhightaxevasion,i.e.,

in the Probit model. On the other hand, in line with the descriptive results during the last five

periods, only contagion can be shown as tax evasion in both, the partial and the full information

treatmentishigherthaninthenoinformationtreatmentbutthedifferenceintaxevasionbetween

thepartialandthefullinformationtreatmentisnotstatisticallysignificant(Wald 0.89).

The impact of control variables is in all models as expected from the previous literature. Audit

probabilityhasahighlysignificantnegativeimpactontaxevasion.Malesubjectsevademoretaxes

than female subjects, which comports e.g. with Kastlunger et al. (2010) or Bazart and Pickhardt

(2011),andeconomicsstudentsarelesscompliantthanothers,ashasbeenshownbeforebyCulliset

al.(2012).Taxevasionincreaseswithdecreasingriskaversionandriskaversiondecreaseswithhigher

incometogether,theseeffectsleadtomoretaxevasionathigherincomes.15Thesepatternsprevail

even if the public resource is crowded out, and all must share the burden of the public bad.16

15
Some subjects switched more than once between the risk free and the risky alternative. To check our results
for robustness we included an indicator variable into our model. The results regarding the impact of the
treatment variables remain unchanged.
16
In this respect, the last period is a special case as there is no follow-up period and, thus, no public bad as a
consequence of tax evasion. However, the results remain qualitatively unchanged even when the last period
is excluded from the analysis.
18

Table2:MultivariateAnalysis

Tobit(all Tobit(first Tobit(last Probit(all Probit(first Probit(last

20Periods) fivePeriods) fivePeriods) 20Periods) fivePeriods) fivePeriods)
12.45 7.94 7.53 0.50 0.98 0.56
Intercept *** ** *
(4.30) (3.70) (7.38) (0.36) (0.51) (0.88)

Partialinformation 4.84 0.39 8.14 0.38 0.12 0.60
** *** * **
treatment (2.09) (1.80) (2.98) (0.22) (0.34) (0.30)

Fullinformation 2.67 2.02 7.73 0.26 0.87 0.68
*** ** **
treatment (2.54) (1.92) (2.95) (0.20) (0.39) (0.27)

67.64 35.09 82.57 5.66 5.41 6.70
Auditprobability *** *** *** *** *** ***
(3.42) (4.25) (6.09) (0.29) (1.10) (0.66)

4.62 3.96 5.46 0.51 0.66 0.66
Female ** ** * ** ** ***
(2.23) (1.70) (2.81) (0.22) (0.30) (0.22)

3.82 2.59 3.14 0.32 0.45 0.19
Studentofeconomics ** *
(1.90) (1.57) (2.71) (0.20) (0.32) (0.26)

1.30 1.05 1.55 0.10 0.12 0.14
Riskaversion ** ** *** ** * **
(0.56) (0.44) (0.53) (0.05) (0.07) (0.05)

0.03 0.04 0.04 0.00 0.01 0.00
Income *** *** *** *** *** ***
(0.00) (0.01) (0.01) (0.00) (0.00) (0.00)

Loglikelihood 7441.77 1993.72 1644.70 1476.37 298.56 401.44
Dependentvariable:taxevasion(Tobitmodels)andhightaxevasion(Probitmodels).
*** 0.01,** 0.05,* 0.1.
Allreportedstandarderrorsarerobustusingthebootstrapmethodwith50replications.

19

V Conclusions

To determine the effect of tax privacy on tax compliance, we designed a novel tax game with tax

privacyasthetreatmentvariableandtaxadministrationcostaspublicbad.Taxprivacyrangedfrom

full confidentiality to full publicity, combining the different forms of tax publicity from Laury and

Wallace(2005)andCoricellietal.(2010).Theoretically,twoopposingeffectsacontagioneffectand

a shame effectcan occur in response to public disclosure. We investigated these effects at three

differentlevelsoftaxprivacy.

Inthepartialinformationtreatment,individualtaxinformationispubliclydisclosedinananonymous

manner. The only difference from the baseline treatment of full tax privacy is that the individual

behavioroftheothersubjectsinonesgroupisobservable.Becausesubjectsremainanonymousin

thistreatment,theshameeffectisnotexpected,andtheonlyimpactoncomplianceresultsfromthe

contagioneffect.Incontrast,inthefullinformationtreatment,publicdisclosureofallindividualsis

employed: tax evaders photos are shown, which presents the potential for the shame effect. The

shameeffectonlyarisesifsubjectscontributionsareknownandlinkedtoeachsubject.Overall,we

findhighertaxevasionwithpublicdisclosureifinformationispublishedanonymously.Thisindicates

thatthepureobservationofdeviantbehaviorcoulddestroythesocialnormofcomplianceandlead

to ones own noncompliance. There is a crowding out of intrinsic motivation to pay taxes.

Additionally, theshame effectappearstobetoosmalltooverridethe contagioneffectwhenboth

are present simultaneously. Although shame is an effective deterrent in early periods of the

experiment, we do not observe an effect in later periods suggesting that the feelings of shame

diminishoverthecourseoftheexperimentbecausesubjectsobservethenoncomplianceofother

participants.

These findings are of particular importance to fiscal policy: general public disclosure could lead to

more,insteadofless,evasion.However,concretepredictionsaredifficulttomakebecausetheyalso

dependonthecurrentstateofexistingsocialnorms.Becauseasystemofsocialnormstypicallyhas

20

multiple equilibria, also history and chance determine where the system settles (Cooter 1998).

Moreover, our experiment is subject to some limitations and, therefore, the results should be

interpretedwithcaution.First,whileAlmetal.(1992)donotfindanyimpactfromterminologyused

(loadedvs.neutral)ontaxcompliance,otherstudiesprovidesomeevidencethatsubjectsaremore

compliantinatax,asopposedtoaneutral,context(Baldry,1986;Wartickatal.,1999;Durhametal.,

2014). This could potentially influence the relative strength of the different effects. Second, the

shame effect could also be more effective in natural settings where longterm economic

consequencesoftenresult.17However,theworkofCoricellietal.(2010)indicatesthataccountingfor

emotionsinthelaboratoryispossibleandthatemotionisthemaindriveroftheshameeffect.There

is no direct reason why emotion should not be present in the laboratory, but stronger financial

consequences might increase the importance of fear in the tax evasion decision. The broader

question here concerns the impact an initiative might have on social behavior where the

motivationalcrowdingliterature(i.e.,BenabouandTirole,2006;BolleandOtto,2010)stressesthe

importanceofthecurrentstateforpredictingpotentialchanges.

In contrast to Laury and Wallace (2005) and Coricelli et al. (2010), tax publicity leads to higher tax

evasioninourstudy(atleast)inthecaseofanonymousdisclosure.Thisstrongdifferencemightbe

due to the missing public good context in these studies, which leads to an underestimation of the

contagioneffect.Outsideapublicgoodorredistributioncontext,thereexistsneitheranecessitynor

an opportunity to cooperate. Within this standard of cooperative behavior, the effects of tax

publicity remain ambiguous with no sustained effect of copying positive behavior, as can be

observed, for instance, in a fundraising context (Andreoni and Petrie, 2004). In addition to the

negativeimpactofshameontaxevasion,thereisanopposingcontagioneffectthatmight,overall,

leadtolesscompliance.

17
In addition, shame may be more effective if not all subjects but e.g. only subjects that evaded most are
named and shamed. Note also, that naming and shaming could have different effects on firms than on
individuals. In particular, those firms where reputation matters a lot and the market penalizes deviant
behavior could be affected by naming and shaming. E.g., Hitz et al. (2012) show the effectiveness of a
name and shame mechanism in an accounting context.
21

Appendix A Experimental instructions

Thank you very much for participating in this experiment on the evaluation of group behavior.
Overall,theexperimentwilllastaboutonehour.Yourpayoffdependsbothonyourowndecisions
andonthedecisionsoftheotherplayers.Inthefollowing,wewillgiveyouashortoverviewonhow
the experiment is carried out. If you have any questions, please do not hesitate to contact the
experimentalsupervisor.

1. Initially,youarerandomlyassignedtooneoutoftwogroups.Bothgroupsaremadeupofsix
players each. Throughout the whole experiment, the groups composition remains
unchanged.
2. There will be a total of 20 rounds. At the beginning of each round, every group member
receives an endowment of 75 cents. Thus, the groups total endowment is 450 cents for
everyround.
3. In each of the 20 rounds, you must pay fees on your endowment. You may decide on the
amountofyourfeesyourself.However,ineachroundyourgroupstotalfeesshouldsumup
to135cents.Inthecaseofauniformdistribution,everymemberofyourgroupwouldhave
topay22.5cents.
4. Ifyourgroupstotalfeesamounttolessthan135cents,theconsequencesforthefollowing
roundaretwofold.First,therewillbeacostforyourgroupintheamountoftheunderpaid
fee. Secondly, the amount of the underpaid fee will determine the probability of your
individual fee being audited in the next round. If you are audited, and it is found that you
paidlessthantherequired22.5cents,yourunderpaidfeeplusapenaltyofhalfofyourless
underpaidfeeswillbecollectedautomatically.
5. The consequences resulting from underpaid fees by your group are given in Table 3. The
tablereadsasfollows:Therewillnot beany costinthenextround,ifyouandyourgroup
memberspaidatleasttherequiredfeeof135centsintotal.Moreover,yourindividualfeein
the following round will not be subject to an audit. For instance, there will be a cost of 6
centsinthefollowingroundifthegroupstotalfeesonlysumupto129cents.Thesecosts
will be split equally among every group member. Thus, in the next round, there will be a
deductionof1centfromtheendowmentofeverymemberofyourgroup.Thecorresponding
auditprobabilityforthenextroundamountsto3%.
6. Atthebeginningofthefirstround,ahypotheticaltotalfeeforthefictionalround0willbe
determined randomly. This fee will be between 1 and 135 cents. The cost and audit
probability for the first round will be determined according to the table above. In all later
rounds,costandauditprobabilityaredeterminedonthebasisoftheactualtotalfeespaidby
yourgroupinthepreviousround.

22

Table3:Consequencesoflesspaidfees

Auditprobability(in%)

Auditprobability(in%)

Auditprobability(in%)

Auditprobability(in%)
Totalcosts

Totalcosts

Totalcosts

Totalcosts
Totalfees

Totalfees

Totalfees

Totalfees

135 0 0.0 101 34 17.0 67 68 34.0 33 102 51.0
134 1 0.5 100 35 17.5 66 69 34.5 32 103 51.5
133 2 1.0 99 36 18.0 65 70 35.0 31 104 52.0
132 3 1.5 98 37 18.5 64 71 35.5 30 105 52.5
131 4 2.0 97 38 19.0 63 72 36.0 29 106 53.0
130 5 2.5 96 39 19.5 62 73 36.5 28 107 53.5
129 6 3.0 95 40 20.0 61 74 37.0 27 108 54.0
128 7 3.5 94 41 20.5 60 75 37.5 26 109 54.5
127 8 4.0 93 42 21.0 59 76 38.0 25 110 55.0
126 9 4.5 92 43 21.5 58 77 38.5 24 111 55.5
125 10 5.0 91 44 22.0 57 78 39.0 23 112 56.0
124 11 5.5 90 45 22.5 56 79 39.5 22 113 56.5
123 12 6.0 89 46 23.0 55 80 40.0 21 114 57.0
122 13 6.5 88 47 23.5 54 81 40.5 20 115 57.5
121 14 7.0 87 48 24.0 53 82 41.0 19 116 58.0
120 15 7.5 86 49 24.5 52 83 41.5 18 117 58.5
119 16 8.0 85 50 25.0 51 84 42.0 17 118 59.0
118 17 8.5 84 51 25.5 50 85 42.5 16 119 59.5
117 18 9.0 83 52 26.0 49 86 43.0 15 120 60.0
116 19 9.5 82 53 26.5 48 87 43.5 14 121 60.5
115 20 10.0 81 54 27.0 47 88 44.0 13 122 61.0
114 21 10.5 80 55 27.5 46 89 44.5 12 123 61.5
113 22 11.0 79 56 28.0 45 90 45.0 11 124 62.0
112 23 11.5 78 57 28.5 44 91 45.5 10 125 62.5
111 24 12.0 77 58 29.0 43 92 46.0 9 126 63.0
110 25 12.5 76 59 29.5 42 93 46.5 8 127 63.5
109 26 13.0 75 60 30.0 41 94 47.0 7 128 64.0
108 27 13.5 74 31 30.5 40 95 47.5 6 129 64.5
107 28 14.0 73 62 31.0 39 96 48.0 5 130 65.0
106 29 14.5 72 63 31.5 38 97 48.5 4 131 65.5
105 30 15.0 71 64 32.0 37 98 49.0 3 132 66.0
104 31 15.5 70 65 32.5 36 99 49.5 2 133 66.5
103 32 16.0 69 66 33.0 35 100 50.0 1 134 67.0
102 33 16.5 68 67 33.5 34 101 50.5 0 135 67.5

7. Atthebeginningofeachround,everyplayerwillbeinformedoftheamountofyourgroups
totalfeespaidinthepreviousround.Thisdeterminesthecurrentauditprobabilityaccording
to the table above. (The following applies only in the partial and the full information
treatments: Every player is informed of the amount of fees paid by every single group
member.)
23

 8. At the end of the 20 rounds, your individual income for every round is summed up. The
payoffofyourparticipationinthisexperimentcorrespondstoyourtotalincome.
9. Subsequenttothe20rounds,therewillbealottery.Afterward,youhavetoanswerashort
questionnaire.Theresultingpayoffforyourparticipationinthisexperimentmaybepicked
upduringtheoffice'sopeninghours.

Theexperimentstartsassoonasallparticipantsareready.

Goodluck!

Appendix B Questionnaire (extract)

1. Age(inyears)
2. Gender(male/female)
3. Studentofeconomics(yes/no)
4. Semester
5. Riskaversion(seeTable4)

Table4:Thetenpairedlotterychoicedecisions(HoltandLaury,2002)

PleasechoosealwaystheonealternativeAorByouprefer.Oneofthe ten
lotteriesyouchoosewillbeselectedrandomly.Youwillbecreditedthe
respectiveresult.
Expectedpayoff
OptionA OptionB
difference
10/10of0.525 1/10of0.75,9/10of0.41 0.08
10/10of0.525 2/10of0.75,8/10of0.41 0.05
10/10of0.525 3/10of0.75,7/10of0.41 0.01
10/10of0.525 4/10of0.75,6/10of0.41 0.02
10/10of0.525 5/10of0.75,5/10of0.41 0.05
10/10of0.525 6/10of0.75,4/10of0.41 0.09
10/10of0.525 7/10of0.75,3/10of0.41 0.12
10/10of0.525 8/10of0.75,2/10of0.41 0.16
10/10of0.525 9/10of0.75,1/10of0.41 0.19
10/10of0.525 10/10of0.75,0/10of0.41 0.23

24