An autonomous research institute under the Ministry of Finance


Tax Compliance in India: An Experimental Approach

Publication date

Nov, 2017


NIPFP Working Paper No. 207


Suranjali Tandon and R. Kavita Rao


The study presents an analysis of results of a laboratory experiment, conducted in 2015 to assess compliance behaviour in India. The experiment evaluates responses of 133 participants, to changes in key policy instruments like tax rate, penalty rate and audit probability. We find that changes in policy parameters generate varied responses across taxpayers. Audit probability is the only policy instrument that generates relatively consistent response. Further, the results show that individuals can be divided into those who respond to change in audit probability and those who respond to other policy variables, suggesting that no single policy would be adequate to induce suitable behavioural changes in all taxpayers.
Keywords: tax compliance, laboratory experiment, audit probability, tax rate, penalty, exemption threshold, stigma
JEL Classification Codes: H26, H3, C91