In Norway, you can see everyone's tax returns
...but people can also see who looked
Norwegian krone. PHOTO: REUTERS
In Norway, everyone’s tax returns are open for inspection, which means you can see the income and financial history of anyone.
But since people can also see exactly who has looked at their tax returns, many refrain from doing so.
David Just, a behavioral economist at Cornell University, explains, “It’s possible to write the decision to look at another person’s tax returns as an equation. That equation would demonstrate estimated risk and the probability of that risk occurring,” which would depend on how well you know the person. Since your decision to check the person’s financial history can be known to them, many people might feel hesitant. “I can see that playing a big role in keeping this from being a situation where everybody checks up on how what everybody else is making,” Just says.
Norway opens $1billion credit line for Iran
Ricardo Perez-Truglia, assistant professor of economics at UCLA, has researched how Norway’s open tax return policy affects behavior. He noted that when it was possible to browse anonymously in 2014, the situation was different. However, after this was changed, “The number of people using the website to search for others’ income went down like crazy. There were still lots of people going to the website but what they wanted to know wasn’t the income of others, but whether others were searching for their own income.”
10 most expensive cities in the world
According to Perez-Truglia, the closer two people are, the higher both the potential cost and benefit of looking at the other’s tax return. “If I see a bunch of people are doing the searches then I think ‘Oh well, if they’re searching, it must be because the social norm is different online,’ ” he says. Perez-Truglia has found that Norway’s decision to make tax returns transparent has had a vast impact, leading to a significant increase in the gap in well-being between the richest and the poorest Norwegians. This is because people are aware of their income relative to others, and know that everybody else knows their own status. This seems to make the wealthy happier, and the poor less happy.
Perez-Truglia is now researching whether having public tax returns changes spending habits. “One reason why people buy really expensive boots and clothing and things like that is because they want to show off, they want to signal that they’re rich. But in Norway, when the public knows who is rich and who is not, what is the point of buying these types of goods?” he asks.
This article originally appeared on Quartz.
But since people can also see exactly who has looked at their tax returns, many refrain from doing so.
David Just, a behavioral economist at Cornell University, explains, “It’s possible to write the decision to look at another person’s tax returns as an equation. That equation would demonstrate estimated risk and the probability of that risk occurring,” which would depend on how well you know the person. Since your decision to check the person’s financial history can be known to them, many people might feel hesitant. “I can see that playing a big role in keeping this from being a situation where everybody checks up on how what everybody else is making,” Just says.
Norway opens $1billion credit line for Iran
Ricardo Perez-Truglia, assistant professor of economics at UCLA, has researched how Norway’s open tax return policy affects behavior. He noted that when it was possible to browse anonymously in 2014, the situation was different. However, after this was changed, “The number of people using the website to search for others’ income went down like crazy. There were still lots of people going to the website but what they wanted to know wasn’t the income of others, but whether others were searching for their own income.”
10 most expensive cities in the world
According to Perez-Truglia, the closer two people are, the higher both the potential cost and benefit of looking at the other’s tax return. “If I see a bunch of people are doing the searches then I think ‘Oh well, if they’re searching, it must be because the social norm is different online,’ ” he says. Perez-Truglia has found that Norway’s decision to make tax returns transparent has had a vast impact, leading to a significant increase in the gap in well-being between the richest and the poorest Norwegians. This is because people are aware of their income relative to others, and know that everybody else knows their own status. This seems to make the wealthy happier, and the poor less happy.
Perez-Truglia is now researching whether having public tax returns changes spending habits. “One reason why people buy really expensive boots and clothing and things like that is because they want to show off, they want to signal that they’re rich. But in Norway, when the public knows who is rich and who is not, what is the point of buying these types of goods?” he asks.
This article originally appeared on Quartz.