Impact of Tax Education on Tax Illusion: An Experimental Study *Moazzam Ali Tarar, **Muhammad Munir Abstract The concept of tax illusion was developed to measure the level of tax awareness among the taxpayers. This paper aims at measuring the level of tax illusion among the traders and conducting an experiment to measure the effect of tax education on the tax illusion. The study was conducted at two consecutive stages. At first stage, a sample of 306 traders was taken from 1576 registered traders of Lahore Chamber of Commerce to measure the existing level of tax illusion. The results of descriptive statistics showed that traders have weak tax awareness with respect to the structure and working of existing tax system along with lesser understanding of Government spending programs. At second stage, two-group experiment consisting of 20 subjects was designed and tax education intervention was applied. The results of the experiment, drawn by Independent Sample T- Test showed that the traders who were provided tax education had a lower level of tax illusion in contrary to the control group. The findings of the study reveal that provision of tax education can significantly reduce the level of tax illusion. The study, on the basis of findings, suggests that suitable tax education program may be designed to reduce tax illusion among traders of Pakistan. Keywords: Tax Illusion, Federal Board of Revenue, Tax Awareness _____________________________________________________________________________________ * Lecturer, Department of Commerce, AIOU, Islamabad ** Lecturer, Department of Commerce, AIOU, Islamabad