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Individual, cognitive and cultural differences in tax compliance: UK and Italy compared

  • Lewis, Alan
  • Carrera, Sonia
  • Cullis, John
  • Jones, Philip
Registered author(s):

    Five hundred and five Italian psychology and economics students took part in a tax compliance study testing the influence of detection rates (within subjects) and the between subjects variables of framing effects, instructions to behave instrumentally or not, degree choice and gender. The sample was an improvement on a previous study conducted in the UK where the effects of gender and degree choice were entangled. The results from the Italian sample showed highly significant effects for detection rates, framing effects, gender and degree choice. Participants declared more as detection rates rose and when tax was framed as a gain. Males and economists declared the least. The instruction to maximise income (instrumentality) encouraged psychologists to declare less, while economists behaved instrumentally whether they were asked to or not. The influence of culture was examined by comparing the two data sets. Although the tax systems of these two countries are very similar, tax evasion is much more common in Italy. As anticipated Italian students declared less than UK students and the results for the Italian sample were more pronounced (e.g. the significant framing effect) but otherwise all are in the same direction. Theoretical and practical implications are discussed as the prospects for future empirical studies.

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    File URL: http://www.sciencedirect.com/science/article/B6V8H-4V17CJ2-1/2/9ca875fa0bd098c98cad3d0e5d1041cc
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    Article provided by Elsevier in its journal Journal of Economic Psychology.

    Volume (Year): 30 (2009)
    Issue (Month): 3 (June)
    Pages: 431-445

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    Handle: RePEc:eee:joepsy:v:30:y:2009:i:3:p:431-445
    Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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    1. Cullis, John & Jones, Philip & Lewis, Alan, 2006. "Tax framing, Instrumentality and individual differences: Are there two different cultures?," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 304-320, April.
    2. Levin, Irwin P. & Gaeth, Gary J. & Schreiber, Judy & Lauriola, Marco, 2002. "A New Look at Framing Effects: Distribution of Effect Sizes, Individual Differences, and Independence of Types of Effects," Organizational Behavior and Human Decision Processes, Elsevier, vol. 88(1), pages 411-429, May.
    3. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    4. Cowell, Frank A, 1985. "The Economic Analysis of Tax Evasion," Bulletin of Economic Research, Wiley Blackwell, vol. 37(3), pages 163-93, September.
    5. Torgler, Benno, 2003. "To evade taxes or not to evade: that is the question," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(3), pages 283-302, July.
    6. Baldry, J C, 1984. "The Enforcement of Income Tax Laws: Efficiency Implications," The Economic Record, The Economic Society of Australia, vol. 60(169), pages 156-59, June.
    7. James Alm & Benno Torgler, 2004. "Culture Differences and Tax Morale in the United States and in Europe," CREMA Working Paper Series 2004-14, Center for Research in Economics, Management and the Arts (CREMA).
    8. Schepanski, A. & Shearer, T., 1995. "A Prospect Theory Account of the Income Tax Withholding Phenomenon," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 174-186, August.
    9. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    10. repec:cup:cbooks:9780521876742 is not listed on IDEAS
    11. Torgler, Benno, 2002. " Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 16(5), pages 657-83, December.
    12. Levin, Irwin P. & Schneider, Sandra L. & Gaeth, Gary J., 1998. "All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing Effects," Organizational Behavior and Human Decision Processes, Elsevier, vol. 76(2), pages 149-188, November.
    13. 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.
    14. Kirchler, Erich & Maciejovsky, Boris, 2001. "Tax compliance within the context of gain and loss situations, expected and current asset position, and profession," Journal of Economic Psychology, Elsevier, vol. 22(2), pages 173-194, April.
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