Timothée Demont : timothee.demont[at]univ-amu.fr
Eva Raiber : eva.raiber[at]univ-amu.fr
This project aims to understand the role that inequity—similar households being treated differently by tax policy—plays in determining compliance with taxation. We do this by combining quasi-experimental variation and rich administrative data on tax liabilities and tax compliance with experimental variation from a novel survey experiment raising the salience of inequity in the context of the municipal property tax in the city of Manaus, Brazil. Studying a 2011 reform, we find that taxpayers’ compliance decisions respond both to their own and their neighbors’ tax liabilities. Our experimental evidence suggests that increasing the salience of inequity leads respondents to find it more acceptable that those disadvantaged by the tax system fail to comply with it. Our findings highlight an underappreciated additional cost of the widespread use of presumptive tax systems, exacerbating the constraints of limited tax capacity to identifying and redistributing between classes of taxpayers.