Deterrence and Income Tax Cheating: Testing Interaction Hypotheses in Utilitarian Theories

Scott, Wilbur J.; Grasmick, Harold G.

doi:10.1177/002188638101700316

Cited by 71 publications

(33 citation statements)

References 18 publications

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“…Kinsey & Grasmick (1993) and Roberts & Hite (1994) report that vertical unfairness of the tax schedule (the progressivity of the income tax) increases tax evasion. This is in line with the results by Scott & Grasmick (1981) who report evidence that deterrence was more effective for taxpayers who perceived the tax system to be unfair. Moreover, Scholz & Lubell (1998) emphasize the importance of trust in government for tax compliance.…”

Section: Feld and Tyran 2002supporting

confidence: 91%

Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation

2006

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A psychological tax contract goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. As a contractual relationship implies duties and rights for each contract party, tax compliance is increased by sticking to the fiscal exchange paradigm between citizens and the state. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to tax payments as long as the political process is perceived to be fair and legitimate. Moreover, friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance. Tax Compliance as the Result of a Psychological University of Zurich AbstractIn this paper, we develop the concept of a psychological tax contract that goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. Based on crowding theory, the impact of deterrence and rewards on tax morale is discussed. As a contractual relationship implies duties and rights for each contract partner, sticking to the fiscal exchange paradigm between citizens and the state increases tax compliance. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to their tax payments as long as the political process is perceived to be fair and legitimate. At the procedural level, a friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.

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Section: Feld and Tyran 2002supporting

confidence: 91%

Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation

2006

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“…Political scientists (Scholz and Pinney 1995; and social psychologists (e.g., Tyler 1990) alike have found that individuals are more likely to comply with government authority when they believe that others are more likely to do so, when they believe that the enforcer's intentions are noble, and when the enforcer has a reputation for making seemingly reasonable and fair decisions. In line with these intuitions, Scott and Grasmick (1981) find that perceptions of deterrence are more important in shaping taxpayer compliance for individuals who perceive the tax system as unfair, while Feld and Frey (2007, 107) argue that mistreatment by enforcement authorities who take a signal of non-compliance to imply actual non-compliance may offend compliant taxpayers. Alm, McClelland, and Schulze (1999) find that experimental subjects reduced contributions to a public good following the failure of their groups to adopt stronger enforcement via majority rule; in their view, the failure to adopt stronger enforcement institutions led to lower willingness to contribute because that failure itself upset underlying norms.…”

Section: Introductionmentioning

confidence: 82%

Enforcement and Compliance in an Uncertain World: An Experimental Investigation

Dickson¹,

Gordon²,

Huber³

2009

The Journal of Politics

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Governments are charged with monitoring citizens' compliance with prescribed behavioral standards and punishing noncompliance. Flaws in information available to enforcing agents, however, may lead to subsequent enforcement errors, eroding government authority and undermining incentives for compliance. We explore these concepts in a laboratory experiment. A "monitor" makes punishment decisions after receiving noisy signals about individuals' choices to contribute to a public good. We find that the possibility of wrongly accusatory signals has a more deleterious effect on contribution levels than the possibility of wrongly exculpatory signals, contrary to a rational-choice benchmark model predicting equal effects. We trace this across-treatment difference to a "false positives trap": when members of a largely compliant population are sometimes incorrectly accused, some will be unjustly punished if enforcement power is employed, but non-compliant individuals will escape punishment if that power is abdicated. Either kind of error discourages compliance. An additional treatment demonstrates that the effectiveness of a given enforcement institution may vary, depending on its origins. We consider implications of our findings for theories of deterrence, fairness, and institutional legitimacy.

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“…Trying to stimulate tax compliance by means of coercion is costly (Kirchler et al, 2008;Murphy, 2004;Scott & Grasmick, 1981), as the majority of the taxpayers will look for all possible loopholes for evasion. Moreover, taking legal actions against a large number of tax POWER, JUSTICE, AND COMPLIANCE 21 evaders drains government revenue.…”

Section: Practical Implicationsmentioning

confidence: 99%

Power, justice, and trust: A moderated mediation analysis of tax compliance among Ethiopian business owners

Gobena

Dijke

2016

Journal of Economic Psychology

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We explored the moderating roles of legitimate and coercive power held by the tax authority in the relationship between procedural justice, trust in the tax authority, and voluntary tax compliance. Drawing from fairness heuristic theory and the slippery slope framework of tax compliance, we predicted that procedural justice fosters voluntary tax compliance, particularly when legitimate power of the tax authority is low and when coercive power of the authority is high. Moreover, we predicted that these interactive effects are mediated by (cognition-based) trust. Finally, we predicted that coercive power of the tax authority is positively related with enforced tax compliance. The results of a field study among Ethiopian business owners supported most predictions. This research is among the first to integrate social-psychological and deterrence-related factors to understand tax compliance behavior in a developing country.

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Deterrence and Income Tax Cheating: Testing Interaction Hypotheses in Utilitarian Theories

Cited by 71 publications

References 18 publications

Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation

Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation

Enforcement and Compliance in an Uncertain World: An Experimental Investigation

Power, justice, and trust: A moderated mediation analysis of tax compliance among Ethiopian business owners

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