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Compliance costs caused by agency action? Empirical evidence and implications for tax compliance

Author

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  • Sebastian Eichfelder

    (University of Wuppertal - Schumpeter School of Business and Economics)

  • Chantal Kegels

Abstract

The compliance costs of private taxpayers are not only affected by the tax law itself but also by its implementation through the tax authorities. In this paper we analyze the effect of the tax authorities on the burden of complying with tax regulations. Using survey data of Belgian businesses and controlling for potential endogeneity, we find empirical evidence that tax authority behavior is an important cost driver. According to our estimate, a customer-unfriendly tax administration increases the average compliance costs by about 25 %. Our outcome has interesting implications for tax compliance research. First of all, taxpayer services do not only affect “soft” factors like fairness and trust, but also “hard” aspects like costs. Furthermore, there may be an inherent ability of the administration to “punish” non-cooperative businesses by in-creased cost-burdens.

Suggested Citation

  • Sebastian Eichfelder & Chantal Kegels, 2012. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Schumpeter Discussion Papers sdp12005, Universitätsbibliothek Wuppertal, University Library.
    • Handle: RePEc:bwu:schdps:sdp12005
    as

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    File URL: https://elekpub.bib.uni-wuppertal.de/ubwhsmig/download/pdf/7345811?originalFilename=true
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    References listed on IDEAS

    as
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Research tribune
      by UDADISI in UDADISI on 2012-04-25 15:45:00

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    Cited by:

    1. Eichfelder, Sebastian, 2013. "Compliance cost estimates: Survey non-response and temporal framing effects," arqus Discussion Papers in Quantitative Tax Research 146, arqus - Arbeitskreis Quantitative Steuerlehre.
    2. Eichfelder, Sebastian & Kegels, Chantal, 2014. "Compliance costs caused by agency action? Empirical evidence and implications for tax compliance," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 200-219.

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    More about this item

    Keywords

    Tax compliance costs; Red tape; Tax administration; Tax compliance; Tax evasion; Tax authority behavior;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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