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Tax Morale and Tax Compliance from the Firm's Perspective

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  • James Alm
  • Chandler McClellan

Abstract

Much recent research has investigated whether values, social norms, and attitudes differ across countries and whether these differences have measurable effects on economic behavior. One area in which such studies are particularly relevant is tax compliance, and a factor that has been suggested as a factor in compliance behavior is "tax morale", or the intrinsic motivation to pay taxes. However, all of this work on tax morale has focused on individuals, not on firms. In this paper, we use information from the Business Environment and Enterprise Performance Survey and also from the World Enterprise Survey for a wide range of countries over several years of data to examine a firm's tax morale and the subsequent impact on firm tax compliance. We use these data first to examine a firm's perception of taxes as an obstacle to doing business. Importantly, once we control for the various factors that affect this perception, what is left is a measure that we believe is a measure of the firm's tax morale, as a driver of the firm's view of the appropriateness of cheating on taxes. With this measure of tax morale, we are then able to examine in a second stage estimation how our estimated firm tax morale affects the compliance decisions of the firm. Ultimately, our results allow us to identify factors that allow the government to improve its efforts to increase firm tax compliance.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Kyklos.

Volume (Year): 65 (2012)
Issue (Month): 1 (02)
Pages: 1-17

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Handle: RePEc:bla:kyklos:v:65:y:2012:i:1:p:1-17

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References

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  1. Alm, James & McClelland, Gary H & Schulze, William D, 1999. "Changing the Social Norm of Tax Compliance by Voting," Kyklos, Wiley Blackwell, vol. 52(2), pages 141-71.
  2. Crocker, Keith J. & Slemrod, Joel, 2005. "Corporate tax evasion with agency costs," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1593-1610, September.
  3. Feld, Lars P & Tyran, Jean-Robert, 2002. "Tax Evasion and Voting: An Experimental Analysis," Kyklos, Wiley Blackwell, vol. 55(2), pages 197-222.
  4. Bosco, Luigi & Mittone, Luigi, 1997. "Tax Evasion and Moral Constraints: Some Experimental Evidence," Kyklos, Wiley Blackwell, vol. 50(3), pages 297-324.
  5. David Joulfaian, 2000. "Corporate Income Tax Evasion and Managerial Preferences," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 698-701, November.
  6. Alm, James & Sanchez, Isabel & de Juan, Ana, 1995. "Economic and Noneconomic Factors in Tax Compliance," Kyklos, Wiley Blackwell, vol. 48(1), pages 3-18.
  7. Goerke, Laszlo & Runkel, Marco, 2006. "Profit Tax Evasion under Oligopoly with Endogenous Market Structure," National Tax Journal, National Tax Association, vol. 59(4), pages 851-57, December.
  8. Torgler, Benno & Schneider, Friedrich G., 2006. "What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries," Berkeley Olin Program in Law & Economics, Working Paper Series qt5q14k3wr, Berkeley Olin Program in Law & Economics.
  9. Ingrid Wahl & Stephan Muehlbacher & Erich Kirchler, 2010. "The Impact of Voting on Tax Payments," Kyklos, Wiley Blackwell, vol. 63(1), pages 144-158, 02.
  10. Bohnet, Iris & Frey, Bruno S, 1994. "Direct-Democratic Rules: The Role of Discussion," Kyklos, Wiley Blackwell, vol. 47(3), pages 341-54.
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  12. Eliza Ahmed & Valerie Braithwaite, 2004. "When Tax Collectors Become Collectors for Child Support and Student Loans: Jeopardizing the Revenue Base?," Kyklos, Wiley Blackwell, vol. 57(3), pages 303-326, 08.
  13. Alm, James & Jackson, Betty R. & McKee, Michael, 1993. "Fiscal exchange, collective decision institutions, and tax compliance," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 285-303, December.
  14. Nipoli Kamdar, 1997. "Corporate income tax compliance: A time series analysis," Atlantic Economic Journal, International Atlantic Economic Society, vol. 25(1), pages 37-49, March.
  15. Kong-Pin & C.Y. Cyrus Chu, 2005. "Internal Control versus External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 151-164, Spring.
  16. Lars P. Feld & Bruno S. Frey, 2002. "Trust breeds trust: How taxpayers are treated," Economics of Governance, Springer, vol. 3(2), pages 87-99, 07.
  17. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-53, July.
  18. Kirchler,Erich, 2007. "The Economic Psychology of Tax Behaviour," Cambridge Books, Cambridge University Press, number 9780521876742.
  19. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
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Cited by:
  1. Nichita Ramona-Anca & Batrancea Larissa-Margareta, 2012. "The Implications Of Tax Morale On Tax Compliance Behavior," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 739-744, July.
  2. Gangl, Katharina & Torgler, Benno & Kirchler, Erich & Hofmann, Eva, 2014. "Effects of supervision on tax compliance: Evidence from a field experiment in Austria," Economics Letters, Elsevier, vol. 123(3), pages 378-382.
  3. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
  4. James Alm & Jorge Martinez-Vazquez & Chandler McClellan, 2014. "Corruption and Firm Tax Evasion," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1422, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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