Tax Compliance in the Rental Housing Market: Evidence from a Field Experiment

VATT Institute for Economic Research Working Papers 122, 2019

39 Pages Posted: 30 Oct 2019

See all articles by Essi Eerola

Essi Eerola

Bank of Finland - Monetary Policy and Research Department; VATT Institute for Economic Research

Tuomas Kosonen

University of Helsinki - Department of Political and Economic Studies

Kaisa Kotakorpi

University of Turku - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Teemu Lyytikäinen

Government of the Republic of Finland - VATT Institute for Economic Research; Spatial Economics Research Centre (SERC)

Jarno Tuimala

Finnish Tax Administration

Date Written: October 3, 2019

Abstract

We study rental income tax compliance using a large-scale randomized field experiment and register data with third-party information on the ownership of apartments. We analyze the responses of potential landlords to treatment letters notifying them of stricter tax enforcement, or providing simplifying information on filing practices for the rental income tax. We find that both types of letters caused an increase in the propensity to report rental income, with letters notifying landlords of the use of third-party information in tax enforcement having the strongest effect. Our research design also allows us to analyze different types of spillover effects in tax enforcement. We find an indication of positive reporting spillovers within the household, but do not find clear evidence of spillovers between landlords in local rental markets.

Keywords: tax compliance, field experiment, rental market

JEL Classification: H26, H31

Suggested Citation

Eerola, Essi and Kosonen, Tuomas and Kotakorpi, Kaisa and Lyytikäinen, Teemu and Tuimala, Jarno, Tax Compliance in the Rental Housing Market: Evidence from a Field Experiment (October 3, 2019). VATT Institute for Economic Research Working Papers 122, 2019, Available at SSRN: https://ssrn.com/abstract=3464295 or http://dx.doi.org/10.2139/ssrn.3464295

Essi Eerola (Contact Author)

Bank of Finland - Monetary Policy and Research Department ( email )

PO Box 160
00101 Helsinki
Finland

VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Tuomas Kosonen

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

Kaisa Kotakorpi

University of Turku - Department of Economics ( email )

Turku
Finland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Teemu Lyytikäinen

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Spatial Economics Research Centre (SERC) ( email )

United Kingdom

Jarno Tuimala

Finnish Tax Administration ( email )

Finland

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