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Social norms and conditional cooperative taxpayers

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  • Traxler, Christian

Abstract

This paper incorporates tax morale into the Allingham and Sandmo (1972) model of income tax evasion. Tax morale is modeled as a social norm for tax compliance. The strength of the norm is shaped endogenously, depending on the share of evaders in the society. Taxpayers act conditionally cooperative as their evasion depends on the others' compliance. We characterize the equilibrium which accounts for this interdependence and study the implications for tax and enforcement policies. The analysis is extended to the case of a society consisting of heterogenous communities. Individual evasion decisions are then embedded in a complex social structure and behavior is influenced by the norm compliance among morale reference groups. Within this framework, we highlight the role of belief management as an alternative policy tool.

Suggested Citation

  • Traxler, Christian, 2010. "Social norms and conditional cooperative taxpayers," European Journal of Political Economy, Elsevier, vol. 26(1), pages 89-103, March.
  • Handle: RePEc:eee:poleco:v:26:y:2010:i:1:p:89-103
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    More about this item

    Keywords

    Tax evasion Social norms Multiple equilibria Conditional cooperation Belief management;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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