Procedural fairness and taxpayers’ response: Evidence from an experiment

We perform an experiment to investigate how the fairness of decision making procedures affects taxpayers’ income reporting behavior. According to our experiment, individuals tend to report more income, and thus evade less tax when majority voting determines a tax rate structure than when a dictatorship determines a tax rate structure. We also find that such a positive effect of majority voting occurs mainly through individuals dissatisfied with the current tax rate structure. These findings hint at a channel through which procedural fairness works to improve tax compliance.