Universität zu Köln

Fochmann, Martin, Hemmerich, Kristina and Kiesewetter, Dirk (2016). Intrinsic and extrinsic effects on behavioral tax biases in risky investment decisions. J. Econ. Psychol., 56. S. 218 - 232. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1872-7719

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Abstract

Individuals often do not take taxes correctly into account, which results in distorted or unexpected investments. We shed further light on the discussion of such behavioral tax perception biases by analyzing intrinsic and extrinsic effects on investment decisions. We study two dimensions: (1) the influence of emotions and perceived risk (individual dimension, intrinsic effects) and (2) the influence of available tax information by varying tax complexity and salience (tax system dimension, extrinsic effects). In our laboratory experiment, we construct the payoff structure such that the subjects are confronted with exactly the same choices in net terms in a situation with or without a capital gains tax. This design allows us to identify pure tax perception biases. We show that both dimensions are able to explain tax perception biases. In particular, we find evidence that perceived risk is lower and consequently willingness to take risk is higher with a capital gains tax (with full loss offset provision) than without taxation. Furthermore, this positive effect on risky investment is higher in a situation with a rather low level of tax information in which tax complexity is high and tax salience is low. (C) 2016 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Fochmann, Martin UNSPECIFIED UNSPECIFIED UNSPECIFIED Hemmerich, Kristina UNSPECIFIED UNSPECIFIED UNSPECIFIED Kiesewetter, Dirk UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-261173
DOI:	10.1016/j.joep.2016.07.003
Journal or Publication Title:	J. Econ. Psychol.
Volume:	56
Page Range:	S. 218 - 232
Date:	2016
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1872-7719
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language INCOME TAXATION; AUCTION FEVER; HYPOTHESIS; EXPERIENCE; SALIENCE; INTERNET; AROUSAL; CHOICES; DEMAND; IMPACT Multiple languages Economics; Psychology, Multidisciplinary Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/26117