Tax Burden Transparency

Maiterth and Sureth-Sloane study the extent to which tax burden misperceptions influence individual and firm decision-making. In this context, transparency about one’s own tax burden as well as about the tax burden of other market participants is relevant. Misperceptions will be identified empirically on the basis of surveys and experiments. In addition, this project examines in how far tax burden misperceptions influence the legislative process and whether these misperceptions are intentionally generated by interest groups.

  • Research Question

    How transparent is the tax burden to individuals, firms, regulators and politicians, and how does (lack of) tax burden transparency affect decision making?

  • Motivation

    Taxes play an important role in decision making for both individuals and firms. However, as taxes are complex and decision makers may be subject to misperceptions their decisions might be distorted by incorrect beliefs on tax burdens and tax burden distributions. Misperceptions of tax regulations may occur due to the variety and complexity of tax information sent by tax regulators. Moreover, taxpayers might not only consider their own tax burden, but also take into account the tax burden of other parties such as their peers when developing their attitude towards tax policy or making real decisions, such as financing or investment decisions. While there is some research on individual misperception of taxes in several countries including Germany, corresponding research on firms is lacking.

  • Research Program

    We investigate misperceptions of the tax burden and tax burden distribution, induced by lack of transparency, and their consequences for the decision making of various economic agents such as individuals, firm owners and managers, regulators, lobbyists and politicians. We will focus on income and corporate taxes. Additionally, we will use the German inheritance tax as an example of a tax often deemed to be a threat for businesses and thus has been subject to longstanding tax reform discussions. In addition to determining the magnitude of misperceptions, we will identify their drivers (e.g., personal characteristics, information deficits, computational issues) and the effects of such misperceptions on the attitude of individuals towards the current German income tax system and selected reform proposals.

  • Contribution

    Our results will help to understand to what extent public transparency about tax burden distribution is achieved and how deficiencies affect tax policy and the behavior of economic agents. We aim to provide informative results for regulators, politicians, firm managers and individuals.

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Participating Institutions

TRR 266‘s main locations are Paderborn University, HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, WHU – Otto Beisheim School of Management, European School of Management and Technology in Berlin and Goethe University Frankfurt who share the same research agenda.