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Trust Breeds Trust: How Taxpayers are Treated

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  • Lars P. Feld
  • Bruno S. Frey

Abstract

Tax compliance has been studied in economics by analysing the individual decision of a representative person between paying and evading taxes. A neglected aspect of tax compliance is the interaction of taxpayers and tax authorities. The relationship between the two actors can be understood as an implicit or "psychological" contract. Studies on tax evasion in Switzerland show that the more strongly the political participation rights are developed, the more important this contract is, and the higher tax morale is. In this paper, empirical evidence based on a survey of tax authorities of the 26 Swiss states (cantons) is presented, indicating that the differences in the treatment of taxpayers by tax authorities can be explained by differences in political participation rights as well.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 098.

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Handle: RePEc:zur:iewwpx:098

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Keywords: Tax Evasion; Tax Authority; Tax Compliance; Direct Democracy;

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  13. Pommerehne, Werner W & Weck-Hannemann, Hannelore, 1996. " Tax Rates, Tax Administration and Income Tax Evasion in Switzerland," Public Choice, Springer, Springer, vol. 88(1-2), pages 161-70, July.
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  15. Frey, Bruno S & Pommerehne, Werner W, 1984. "The Hidden Economy: State and Prospects for Measurement," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 30(1), pages 1-23, March.
  16. Cullis, John G. & Lewis, Alan, 1997. "Why people pay taxes: From a conventional economic model to a model of social convention," Journal of Economic Psychology, Elsevier, Elsevier, vol. 18(2-3), pages 305-321, April.
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  22. Feld, Lars P, 2000. "Steuerwettbewerb und seine Auswirkungen auf Allokation und Distribution," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, edition 1, volume 10, number urn:isbn:9783161473852, July.
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