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An Economic Model of Tax Compliance with Individual Morality and Group Conformity

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  • Laura Sour

    (CIDE)

Abstract

Scholars in public finance traditionally have analyzed tax compliance using the Allighman-Sandmo model. I include in this model both moral and social payoffs for compliance. This approach can explain four pieces of evidence that have not been explained by the traditional model, namely i) high level of tax compliance; ii) honest responses when individuals pay their taxes, even in the presence of high incentives for tax evasion; iii) the level of evasion increases with the tax rate; and iv) individuals are more likely to evade when they realize that there is a large number of evaders in society.

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File URL: http://www.economiamexicana.cide.edu/num_anteriores/XIII-1/LAURA_SOUR.pdf
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Bibliographic Info

Article provided by in its journal Economia Mexicana NUEVA EPOCA.

Volume (Year): XIII (2004)
Issue (Month): 1 (January-June)
Pages: 43-61

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Handle: RePEc:emc:ecomex:v:13:y:2004:i:1:p:43-61

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Keywords: tax compliance; evasion; social norms; honesty; moral values; social interaction.;

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  1. Sheffrin, S.M. & Triest, R.K., 1991. "Can Brute Deterrence Backfire? Perceptions and Attitudes in Taxpayer Compliance," Papers 373, California Davis - Institute of Governmental Affairs.
  2. Myles, Gareth D. & Naylor, Robin A., 1996. "A model of tax evasion with group conformity and social customs," European Journal of Political Economy, Elsevier, vol. 12(1), pages 49-66, April.
  3. Pencavel, John H., 1979. "A note on income tax evasion, labor supply, and nonlinear tax schedules," Journal of Public Economics, Elsevier, vol. 12(1), pages 115-124, August.
  4. Poterba, James M, 1987. "Tax Evasion and Capital Gains Taxation," American Economic Review, American Economic Association, vol. 77(2), pages 234-39, May.
  5. Frey, Bruno S, 1992. "Tertium Datur: Pricing, Regulating and Intrinsic Motivation," Kyklos, Wiley Blackwell, vol. 45(2), pages 161-84.
  6. Slemrod, Joel B, 1985. "An Empirical Test for Tax Evasion," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 232-38, May.
  7. Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
  8. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  9. Friedland, Nehemiah & Maital, Shlomo & Rutenberg, Aryeh, 1978. "A simulation study of income tax evasion," Journal of Public Economics, Elsevier, vol. 10(1), pages 107-116, August.
  10. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  11. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
  12. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-76, August.
  13. Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, 03.
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Cited by:
  1. Paulo Reis Mourao,Ph.D, 2011. "Sins of the elder: Fiscal illusion in democracies," Hacienda Pública Española, IEF, vol. 196(1), pages 9-35, january.

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