Cautionary tales: How the tax office benefits from celebrity tax evaders

Lästid: 2-4 minuter
Kategorier: Tillväxt
bookkeeping-615384_1280

Tax authorities obviously gain when they detect tax evasion and collect taxes due, be it from celebrities or ordinary citizens. However, pursuing prominent tax evaders also has an indirect – potentially even larger – effect on tax revenues.

The reason is that media outlets are usually quite eager to report about celebrities with tax problems. Recent examples include football stars Cristiano Ronaldo and Lionel Messi, politicians Silvio Berlusconi and Yulia Tymoshenko, or singers Shakira and Marc Anthony. A newly published study shows that this kind of media coverage increases the compliance of ordinary tax payers, especially when celebrities have to stand trial for tax evasion. For example, photos of a celebrity being brought into court in handcuffs or pictures of a prison cell are powerful images that catch the attention of the public.

The aforementioned study analyzed reports about celebrity tax evaders, published by 60 German regional and national newspapers between 2010 and 2016. The authors linked this information to data on participation in Germany’s tax amnesty program: Under certain conditions, tax evaders have the possibility to come clean in exchange for impunity. The study shows that the amount of these self-denunciations increases when (and where) newspapers cover court trials involving prominent tax evaders.

The size of the effect is substantial: News coverage in the amount of an average trial increases the quarterly number of self-denunciations by 23%. Thus celebrity trials can be cautionary tales for other unlawful citizens. Using a phrase that guides the activities at JIBS, the news coverage animates tax payers to be more “responsible in action”.

In the language of economists, the study “identifies” the causal effect of the news coverage by using a so-called instrumental-variable approach. This approach allows to mimic the conditions of randomized controlled experiments, but outside the laboratory.

The way courts, authorities, and the press handle prominent delinquents can be crucial for the actions of ordinary citizens. On the one hand, celebrities should not be granted a bonus when they are pursued; or else, tax evasion might be encouraged. On the other hand, the authorities should resist penalizing prominent tax evaders more severely than other citizens, as democratic societies rely on the equal treatment of their constituents.

Links to the study

https://www.sciencedirect.com/science/article/pii/S0167268118302439(published version)

https://www.marcelgarz.com/wp-content/uploads/Self-denunciations-Aug-2018.pdf(free access working paper version)

 

mg

Marcel Garz
Assistant Professor, Economics
E-mail: marcel.garz@ju.se
https://www.marcelgarz.com

 

 

 

Lämna en kommentar

  • emenel

    Andrea, thank you for a really thorough and well considered response. I feel that we are in a really good position, one where our minor disagreements are more about our individual school of design and education, rather than a fundamental disagreement or misunderstanding of what design is. This is good, and the right place to have a real conversation about theory and practice.

    Also, I tend to come at this discussion from the perspective of a practitioner rather than an academic. I did study design, art, and critical theory when I was a student, and have tried to maintain that as a core piece of my practice.. but in the end I am mainly a practitioner of design in the 21st century.

    As you speak about approaching design, including a chair, from the perspective of an architect, I came to the same design problem from the perspective of an artist and image maker (film/photography), which is where my education lies. Over the last decade my perspective has been radically altered by interaction design (in the Moggridge and Buchanan sense) and I now approach many design problems from the perspective of ”interaction” as the fundamental aspect. I believe that we (the two of us) often look at things similarly, even if from different sides of the equation.

    I also often look to the Bauhaus as an example of where design and art were practiced holistically and across scales and disciplines. I dream of a new era of creative practice that enables us to tackle the increasingly crazy issues and opportunities of this new century. To get there, like the Bauhaus, we need to understand the different disciplines, how they relate and overlap, and how to begin to master more than one of them. We need to bring back the foundation year and offer it to all who want to join this field.

    The one major area where I feel we disagree (and in a friendly ”it’s ok to disagree” kind of way) is around the nature of meaning, sense, and form. I understand your perspective from what you wrote above and in your other articles. My perspective is that all formal choices will impact the understanding and meaning created by the system.

    To use your chess example – one can play chess on a board, over the phone, over email, in the post, etc. Each of these is ostensibly the same game with the same rules and basic strategy. However, the meaning of playing that game for the individuals involved is highly impacted by the manner in which they play. The speed of moves, the style of the replies, the length of time you have to consider your next move… all of these things change the nature and understanding of the game in that moment. The overall system of chess hasn’t changed, but the final form changes the meaning to the players.

    In my practice, and the way I like to train people (maybe I’m creating my own school of design?), we consider the entire system, and then each instantiation (that we can know of) and the impact of the form of that use of the system. Systems theory, especially Soft Systems and Cybernetics, is at the core of our practice, but people’s understanding of the system comes from their interface with the part of it they are trying to use.

    I’ll finish by saying that I love this conversation. I hope that things like this will contribute to all of us better understanding what we do and why we do it, and in turn will make us better at it.

    • http://andrearesmini.com/ Andrea Resmini

      Thanks, Matt. I agree, we are often coming at this from different, complementary perspectives, and it doesn’t really surprise me. Let’s keep this conversation going. Thanks again.

  • http://andrearesmini.com/ Andrea Resmini

    Christina Wodtke has just produced a more readable version of her recap for those who are used to reading 140 characters at the most. You can find it here: http://www.eleganthack.com/for-the-nerd-people-tldr/.