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Deterrence and tax morale in the European Union

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  • FREY, BRUNO S.

Abstract

Deterrence has been the prevalent strategy to enforce tax revenue both throughout history and in economic theory. This approach is, however, problematic because it is inconsistent with empirical reality. I wish to consider a new way of thinking about taxation, following psychological economics. I submit that individuals have a substantial amount of civic virtue and tax morale. Taxation is quasi-voluntary and cannot reasonably be enforced by deterrence. Tax morale is lowered when the citizens have little trust in their state, and feel badly treated by the tax office. According to official surveys, the European Union is faced with a democracy deficit and dwindling support from the citizens. At the EU-level, civic virtue and tax morale can be improved by offering more (direct) political participation rights and raising taxes in a decentralized way.

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Bibliographic Info

Article provided by Cambridge University Press in its journal European Review.

Volume (Year): 11 (2003)
Issue (Month): 03 (July)
Pages: 385-406

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Handle: RePEc:cup:eurrev:v:11:y:2003:i:03:p:385-406_00

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Cited by:
  1. James, Simon & Edwards, Alison, 2010. "An annotated bibliography of tax compliance and tax compliance costs," MPRA Paper 26106, University Library of Munich, Germany.
  2. Johannes Koettl & Truman Packard & Claudio E. Montenegro, 2012. "In From the Shadow : Integrating Europe's Informal Labor," World Bank Publications, The World Bank, number 9377, August.
  3. Savaş Çevik & Harun Yeniçeri, 2013. "The Relationship between Social Norms and Tax Compliance: The Moderating Role of the Effectiveness of Tax Administration," International Journal of Economic Sciences, University of Economics, Prague, vol. 2013(3).
  4. Liliana Bunescu & Carmen Comaniciu, 2011. "Romanian Taxpayers’ Inclination To Tax Cheating," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 6(1), pages 19-29, April.
  5. Kirchler, Erich & Hoelzl, Erik & Wahl, Ingrid, 2008. "Enforced versus voluntary tax compliance: The "slippery slope" framework," Journal of Economic Psychology, Elsevier, vol. 29(2), pages 210-225, April.
  6. Ratto, Marisa & Thomas, Richard & Ulph, David, 2013. "The indirect effects of auditing taxpayers," Economics Papers from University Paris Dauphine 123456789/4728, Paris Dauphine University.
  7. Kogler, Christoph & Batrancea, Larissa & Nichita, Anca & Pantya, Jozsef & Belianin, Alexis & Kirchler, Erich, 2013. "Trust and power as determinants of tax compliance: Testing the assumptions of the slippery slope framework in Austria, Hungary, Romania and Russia," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 169-180.

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