Tax Compliance by Trust and Power of Authorities

Abstract

The following is a summary of Kirchler et al.'s (2008a) framework for tax compliance. The 'slippery slope' framework distinguishes two forms of compliance. Whereas voluntary compliance is driven by trust in tax authorities, enforced compliance depends on the power of authorities. It is assumed, however, that the interplay of trust and power is crucial for both forms of compliance. The framework serves as a guideline for tax research and tax policy.Tax compliance, trust, power,

A measuring instrument to evaluate e-service quality in a revenue authority setting

“…Better service quality management of the e-services rendered to tax practitioners might impact the trust in the tax authority and also influence taxpayer compliance (Feld & Frey, 2002;Meuhlbacher & Kirchler, 2010;Murphy, 2004).…”

Unemployment, tax evasion and the slippery slope framework

“…As a result, with the right mix of policy tools of deterrence (penalty and monitoring rate), trust in tax authorities is maximised, voluntary tax compliance increases and thus a fair and profitable interaction between tax authorities and taxpayers could be achieved (Muehlbacher and Kirchler, 2010 …”

“…The 'slippery slope' framework stresses the crucial interaction of power and trust (Kirchler et al, 2008a;2008b;Muehlbacher and Kirchler, 2010). Indeed, empirical analysis shows that trust and power positively influence tax payments; in particular, trust increases and power decreases voluntary compliance, whereas power increases and trust decreases enforced compliance (Wahl, Kastlunger and Kirchler, 2010).…”

“…Following Muehlbacher and Kirchler's (2010) insight, we assume that too frequent tax audits and rigorous penalties may corrode the trust of honest taxpayers in tax authorities, but at the same time, no audits at all may bring up doubts about the power of tax authorities and cause distrust in the effectiveness and credibility of tax authorities' work. Formally, we assume that trust in tax authorities ( η ) is given by: 5…”

“…Furthermore, we assume that trust in tax authorities increases the size of declared income, since voluntary compliance is based on a trustful relationship towards tax authorities (Muehlbacher and Kirchler, 2010 ), while the maximisation of trust decreases enforced compliance, since ρφ must be reduced (see Figure 1). The model is thus able to mimic the interaction between power and trust.…”