Economic and Non-Economic Factors: An Analysis of Corporate Tax Compliance

Abstract

Purpose À This chapter applies an "integrative" model to examine the impact and interaction of economic and moral/social factors in the corporate tax compliance context. More specifically, it examines whether social norms moderate the effect of economic factors in this context.Design/methodology À Fifty-five MBA students assumed corporate CFO roles and analyzed a proposed aggressive corporate tax shelter transaction ("tax shelter"). Participants indicated whether they would recommend the tax shelter and answered questions regarding the transaction and their corporate tax compliance views.Findings À Hierarchical Regression results indicate that, in the corporate tax compliance context, decision makers' norms (moral/social factors) moderate the effect of perceived expected value of aggressive tax transactions (economic factors). More specifically, results indicate that (1) perceived legality of aggressive corporate tax transactions significantly impacts willingness of corporate decision makers to recommend them, even when controlling for perceived economic effect of the transaction, and (2) due to moral/social factors, corporate decision makers often may not support aggressive tax treatments with material positive expected values.Practical implications À Accordingly, (1) custom and social factors should be integrated into the corporate tax compliance decision-making framework, and (2) campaigns to strengthen corporate tax compliance should focus on the law's text and intent as well as upon sanctions for noncompliance.

Policy review of government regulation no. 55 of 2022 regarding regulations adjustment of income tax in the micro small medium enterprises (MSMEs)

“…Within the scope of corporate tax compliance, Downs & Stetson (2014) has three indications that are more applicable to economic and moral/social norms approaches. The first indication is that corporate taxpayers will comply with a tax regulation if the positive expected value is material.…”

Can Voluntary Tax Compliance Status Lead to Participation, Transparency and Co-operation?

“…The idea of a co-operative model offers the administration (governance) greater benefits with limited cost, which refers to the principle of efficient tax collecting (Slemrod, 1990). Modern tax compliance strategies focus more intensively on the social/ moral components of taxation, whereas nowadays, scientific findings often express doubts about the traditional view that tax avoidance and evasion can only be prevented through strict controls or investigations and severe penalties (Downs & Stetson, 2014).…”

Moderating role of patriotism on sales tax compliance among Jordanian SMEs

“…In the same vein, Wenzel (2004) indicated that social factors may significantly affect and meet the requirements of the deterrence procedures. Downs and Stetson (2014) indicated that social factors can have moderating effects on economic factors.…”