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Tax Evasion in a Transition from Socialism to Capitalism: The Psychology of the Social Contract

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Author Info
Vihanto, Martti () (BOFIT)
Abstract

In a common assumption of the economics of tax evasion, extending beyond the basic Allingham-Sandmo model, the choice of a taxpayer to evade taxes depends upon the perceived fairness of the tax system. The purpose of the paper is to provide a psychological foundation for this assumption by drawing on Hayek’s theory of human behavior as a process of rule following. According to the main hypothesis, taxpayers are more compliant with tax laws to which they can in principle give their full consent. A social contract as a basis of tax policy may provide a potent means to combat tax evasion particularly in transition economies that have inherited a deep mistrust of the government from their socialist past.

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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 6/2000.

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Length: 39 pages
Date of creation: 06 Jul 2000
Date of revision:
Handle: RePEc:hhs:bofitp:2000_006

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Related research
Keywords: tax evasion; social contract; economics of psychology; transition economies; Austrian economics;

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  1. Vihanto, Martti, 1999. " Social Contract and Introspection. A Proposal for an Austrian Welfare Economics," The Review of Austrian Economics, Springer, vol. 12(1), pages 5-24. [Downloadable!] (restricted)
  2. Frey, Bruno S. & Eichenberger, Reiner, 1994. "Economic incentives transform psychological anomalies," Journal of Economic Behavior & Organization, Elsevier, vol. 23(2), pages 215-234, March. [Downloadable!] (restricted)
  3. Brian Erard & Jonathan Feinstein, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Carleton Industrial Organization Research Unit (CIORU) 94-03, Carleton University, Department of Economics.
  4. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997-2), pages 159-240. [Downloadable!]
  5. Frey, Bruno S, 1992. "Tertium Datur: Pricing, Regulating and Intrinsic Motivation," Kyklos, Blackwell Publishing, vol. 45(2), pages 161-84.
  6. Porcano, Thomas M., 1988. "Correlates of tax evasion," Journal of Economic Psychology, Elsevier, vol. 9(1), pages 47-67, March. [Downloadable!] (restricted)
  7. Cowell, F. A., 1992. "Tax evasion and inequity," Journal of Economic Psychology, Elsevier, vol. 13(4), pages 521-543, December. [Downloadable!] (restricted)
  8. Denzau, Arthur T & North, Douglass C, 1994. "Shared Mental Models: Ideologies and Institutions," Kyklos, Blackwell Publishing, vol. 47(1), pages 3-31.
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  9. Elffers, Henk & Hessing, Dick J., 1997. "Influencing the prospects of tax evasion," Journal of Economic Psychology, Elsevier, vol. 18(2-3), pages 289-304, April. [Downloadable!] (restricted)
  10. Erard, Brian & Feinstein, Jonathan S, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 70-89.
  11. 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. [Downloadable!] (restricted)
  12. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June. [Downloadable!] (restricted)
  13. Sugden, Robert, 1984. "Reciprocity: The Supply of Public Goods through Voluntary Contributions," Economic Journal, Royal Economic Society, vol. 94(376), pages 772-87, December. [Downloadable!] (restricted)
  14. repec:att:wimass:199610 is not listed on IDEAS
  15. Fauvelle-Aymar, Christine, 1999. "The Political and Tax Capacity of Government in Developing Countries," Kyklos, Blackwell Publishing, vol. 52(3), pages 391-413.
  16. Pirttilä, Jukka, 1999. "Tax Evasion and Economies in Transition: Lessons from Tax Theory," BOFIT Discussion Papers 2/1999, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  17. Langlois, Richard N & Foss, Nicolai J, 1999. "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization," Kyklos, Blackwell Publishing, vol. 52(2), pages 201-18.
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  18. Alm, James & McClelland, Gary H & Schulze, William D, 1999. "Changing the Social Norm of Tax Compliance by Voting," Kyklos, Blackwell Publishing, vol. 52(2), pages 141-71.
  19. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-95, September. [Downloadable!] (restricted)
  20. Pommerehne, Werner W & Hart, Albert & Frey, Bruno S, 1994. "Tax Morale, Tax Evasion and the Choice of Policy Instruments in Different Political Systems," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 52-69.
  21. 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. [Downloadable!] (restricted)
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