Impacts of public disclosure on tax compliance using agent-based modeling

Abstract

AbstractThis study examines the impact of public disclosure of tax information on tax compliance using simulation experiments utilizing agent-based modeling. We investigate two scenarios: (i) partial disclosure, in which tax returns and audit results are made public without taxpayer identities, and (ii) full disclosure, in which this information is publicized with taxpayer identities. Our simulation results reveal that in the partial disclosure scenario, the effect on tax compliance is contingent upon the social state of individual moral values regarding tax payment. Specifically, partial disclosure has a positive impact on tax compliance when taxpayers exhibit a relatively strong moral consciousness and a negative impact when their moral consciousness is weak. In the full disclosure scenario, when the moral consciousness of the population is sufficiently weak, the average reported income decreases despite the positive effect of the naming-and-shaming policy on tax compliance.