National pride and tax compliance: A laboratory experiment using a physiological marker

Abstract

This paper reports on a laboratory experiment designed specifically to test the influence of national pride on tax honesty while using a physiological marker to observe emotional responses to patriotic priming. Participants were exposed to one of three framing videos before earning income in a real effort task and were given the chance to declare their taxable income. We find that psychological priming through exposure to symbols of Australian national pride and national identity had a positive effect on the level of tax compliance among Australian but not non-Australians. In addition, non-Australians report lower tax compliance ratios in the treatment groups than in the control group which may indicate an outgroup effect. When exploring the potential of a physiological marker of national pride we observe two different types of physiological responses to the activation and effects of national pride and its impact on tax compliance among Australians. Iconic images activate the parasympathetic nervous system while sports scenes activate the sympathetic nervous system, but both types of images and responses are positively associated with tax compliance. In addition, we find that non-Australians resident in the country for more than a year report a higher level of tax compliance, and that there are some similarities in heart rate variability (HRV) responses between Australian citizens born in the country and those born overseas who have been in Australia for a longer period. Overall, the results support the proposition that identifying with an ingroup at a national level is important for tax compliance.

Behavioral Taxation: Opportunities and Challenges

“…Interestingly, here they also found that tax compliance was lower after positive incidental priming than aversive incidental priming. Those findings support the research avenue that tries to understand how compliance factors such as perceived levels of deterrence are affected by our emotions and how priming via images and videos affect the tax compliance process (see also Macintyre et al 2021, Gangl et al 2016. Overall, more evidence is needed to understand how contextual and environmental conditions affect taxpayers' decisions.…”

“…Stories are particularly relevant when creating an identity. Providing videos, stories, news on honest taxpayers (e.g., role models), symbols that make people proud can affect their compliance behavior (Gangl et al 2016, Macintyre et al 2021. The use of such stories and narration can also be subject to manipulation and misuse.…”