Taxpayers often hide true income because admitting evasion is socially undesirable, so identifying noncompliance is difficult. This study uses a list experiment to reduce social desirability bias and uncover who is most likely to underreport income on tax returns.
📞 How the evidence was collected
A dataset from a tax office in Jakarta, Indonesia was paired with a computer-assisted telephone interviewing (CATI) survey conducted in 2019. The survey embedded a list experiment—a technique that masks individual answers to sensitive questions—to estimate the true prevalence of income underreporting.
🔎 What the analysis shows
- An estimated 13% of taxpayers reported lower income on their tax returns than their true income.
- Underreporting is concentrated among older taxpayers, males, corporate employees, and members of a certain ethnic group.
- The list experiment mitigates social desirability bias in responses and enables identification of characteristics associated with tax evasion.
🧠Why this matters
These results reveal hidden noncompliance that is difficult to detect with direct questioning. Knowing which groups are more likely to underreport helps tax authorities design targeted taxation schemes and compliance strategies that reduce evasion and improve revenue collection.
📌 Takeaway
Applying list experiments in administrative surveys offers a practical tool for uncovering sensitive behaviors like tax evasion and informing more effective tax policy and enforcement.
