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Walking inside the Potential Tax Evader's Mind

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  • Juan Carlos Molero

    ()
    (School of Economics and Business Administration, University of Navarra)

  • Francesc Pujol

    ()
    (School of Economics and Business Administration, University of Navarra)

Abstract

The classical Allingham-Sandmo-Yitzhaki model explains tax evasion behavior based on the probability of being discovered, the amount of the fine imposed and the level of risk aversion. Nonetheless, empirical studies show that the decision and the level of tax evasion depends also on non economic considerations, usually named as the "psychological costs" associated to tax evasion. We build a theoretical model of tax evasion including non monetary considerations. We propose an empirical study on the determinants of the psychological costs of tax evasion, based on the theoretical taxonomy proposed by Lagares (1994). Data come from a questionnaire filled by 781 university students. The dependent variable is the percentage of students considering acceptable to evade taxes. Using a binomial logit model we find that the justification of tax evasion is statistically related with: the presence of grievance in absolute terms (those who feel that taxes are too high; waste of public funds) and grievances in relative terms (the suspected level of tax evasion by others, those accepting black economy labor). The sense of duty and the level of solidarity are also relevant factors, but in a lesser extent.

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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 01/05.

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Length: 33 pages pages
Date of creation: Jan 2005
Date of revision:
Publication status: Published, Journal of Business Ethics, Volume 105 / 2012, pp. 151-162.
Handle: RePEc:una:unccee:wp0105

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Web page: http://www.unav.es/facultad/econom

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  1. Cowell,Frank & Gordon,James, 1987. "Unwillingness to pay: Tax evasion and public good provision," Discussion Paper Serie A 142, University of Bonn, Germany.
  2. 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.
  3. Benno Torgler, 2003. "Beyond Punishment: a tax compliance experiment with taxpayers in Costa Rica," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 18(1), pages 27-56, June.
  4. Ockenfels, Axel & Weimann, Joachim, 1999. "Types and patterns: an experimental East-West-German comparison of cooperation and solidarity," Journal of Public Economics, Elsevier, vol. 71(2), pages 275-287, February.
  5. repec:att:wimass:9610 is not listed on IDEAS
  6. 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.
  7. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  8. Baldry, Jonathan C, 1987. "Income Tax Evasion and the Tax Schedule: Some Experimental Results," Public Finance = Finances publiques, , vol. 42(3), pages 357-83.
  9. Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346.
  10. Jan Hanousek & Filip Palda, 2002. "Why People Evade Taxes in the Czech and Slovak Republics: A Tale of Twins," Public Economics 0205003, EconWPA.
  11. Falkinger, Josef, 1988. "Tax Evasion and Equity: A Theoretical Analysis," Public Finance = Finances publiques, , vol. 43(3), pages 388-95.
  12. 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.
  13. Bordignon, Massimo, 1993. "A fairness approach to income tax evasion," Journal of Public Economics, Elsevier, vol. 52(3), pages 345-362, October.
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Cited by:
  1. Jorge Martinez-Vazquez & Benno Torgler, 2007. "The Evolution of Tax Morale in Modern Spain," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0719, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. Klarita Gërxhani & Kuiper, E., 2004. "WP 32 - Tax evasive behaviour and gender in a transition country," AIAS Working Papers wp32, AIAS, Amsterdam Institute for Advanced Labour Studies.
  3. Torgler, Benno, 2011. "Tax morale and compliance : review of evidence and case studies for Europe," Policy Research Working Paper Series 5922, The World Bank.

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