What Makes a Tax Evader?

Why do some individuals choose to evade taxes while others do not? In collaboration with Uruguay’s national tax agency, we use unique data to address this question. Drawing on third-party reports, we measure income underreporting at the individual level as an indicator of tax evasion. We also collect novel survey data and link it to administrative records at the individual level. We then examine which metrics, if any, best predict tax evasion. Using survey questions and incentivized laboratory games, we measure traits such as honesty and selfishness. These traits exhibit little predictive power. In contrast, the behavior of former and current coworkers, as well as economic factors such as the marginal tax rate, are stronger predictors.