Reducing Evasion Through Self-Reporting: Evidence from Charitable Contributions

Using a quasi-experimental design applied to noncash charitable contribution deductions, we show that even basic self-reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers.

Published in Journal of Public Economics, 2018, volume 165 (September), pp. 31-47

In absence of third-party reporting, taxpayers are required to self-report information with various degrees of detail, ranging from uncorroborated claims to comprehensive records with receipts. Using a quasi-experimental design applied to noncash charitable contribution deductions, we show that even basic self-reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers. We find that simplified reporting requirements reduce reporting costs by $55 per person and substantially increase claimed donations. However, half of the new donations are due to evasion. Thus, information reporting should only be imposed on total reported donations above a pre-specified threshold.

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