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The interaction between trust and power: Effects on tax compliance and macroeconomic implications

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  • Lisi, Gaetano

Abstract

This paper aims to formalise both the role of trust (in) and power (of) tax authorities as major determinants of tax compliance, and the interplay between trust and power and its influence on tax climate and overall tax compliance. Unlike the related literature that studies the role of the psychological determinants of individual tax compliance, this paper focuses on the macroeconomic implications of the “slippery slope” framework. The main finding is that trust-building actions are better than deterring measures. In a society where the tax authority respects the taxpayers and applies transparent and fair procedures, in fact, trust and tax compliance are higher, tax evasion is lower and thus the level of taxation can be reduced. Hence, firms open more vacancies, thus increasing the employment rate.

Suggested Citation

  • Lisi, Gaetano, 2014. "The interaction between trust and power: Effects on tax compliance and macroeconomic implications," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 53(C), pages 24-33.
    • Handle: RePEc:eee:soceco:v:53:y:2014:i:c:p:24-33
    DOI: 10.1016/j.socec.2014.07.004
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    Cited by:

    1. Siglé, Maarten & Goslinga, Sjoerd & Speklé, Roland & van der Hel, Lisette & Veldhuizen, Robbert, 2018. "Corporate tax compliance: Is a change towards trust-based tax strategies justified?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 32(C), pages 3-16.
    2. Adamu Jibir & Musa Abdu & Tasiu Muhammad, 2020. "Analysis of Tax Compliance in Sub-Saharan Africa: Evidence from Firm-Level Study," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 5(2), pages 119-142, December.
    3. Sandra Aulia & Haula Rosdiana & Inayati Inayati, 2022. "Trust, Power, and Tax Risk into the “Slippery Slope”: A Corporate Tax Compliance Model," Sustainability, MDPI, vol. 14(22), pages 1-18, November.
    4. Pukelienė Violeta & Kažemekaitytė Austėja, 2016. "Tax Behaviour: Assessment of Tax Compliance in European Union Countries," Ekonomika (Economics), Sciendo, vol. 95(2), pages 30-56, February.
    5. McWherter, Brooke & Bauchet, Jonathan & Ma, Zhao & Grillos, Tara & Asquith, Nigel & Rathjen, Meagan & Markos, Andrea, 2022. "Compliance under control: Insights from an incentive-based conservation program in rural Bolivia," Ecological Economics, Elsevier, vol. 194(C).
    6. Gaetano Lisi, 2019. "Slippery slope framework, tax morale and tax compliance: a theoretical integration and an empirical assessment," Discussion Papers in Economic Behaviour 0219, University of Valencia, ERI-CES.

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    More about this item

    Keywords

    Trust and power; Tax compliance; Tax climate; Job creation;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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