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Compliance costs caused by agency action? Empirical evidence and implications for tax compliance

  • Sebastian Eichfelder

    ()

    (University of Wuppertal - Schumpeter School of Business and Economics)

  • Chantal Kegels
Registered author(s):

    The compliance costs of private taxpayers are not only affected by the tax law itself but also by its implementation through the tax authorities. In this paper we analyze the effect of the tax authorities on the burden of complying with tax regulations. Using survey data of Belgian businesses and controlling for potential endogeneity, we find empirical evidence that tax authority behavior is an important cost driver. According to our estimate, a customer-unfriendly tax administration increases the average compliance costs by about 25 %. Our outcome has interesting implications for tax compliance research. First of all, taxpayer services do not only affect “soft” factors like fairness and trust, but also “hard” aspects like costs. Furthermore, there may be an inherent ability of the administration to “punish” non-cooperative businesses by in-creased cost-burdens.

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    File URL: http://elpub.bib.uni-wuppertal.de/servlets/DerivateServlet/Derivate-2674/sdp12005.pdf
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    Paper provided by Universitätsbibliothek Wuppertal, University Library in its series Schumpeter Discussion Papers with number sdp12005.

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    Length: 29
    Date of creation: Apr 2012
    Date of revision:
    Handle: RePEc:bwu:schdps:sdp12005
    Contact details of provider: Web page: http://elpub.bib.uni-wuppertal.de

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    9. Alm, James & Jackson, Betty & McKee, Michael, 1992. "Institutional Uncertainty and Taxpayer Compliance," American Economic Review, American Economic Association, vol. 82(4), pages 1018-26, September.
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    12. Tran-Nam, Binh & Evans, Chris & Walpole, Michael & Ritchie, Katherine, 2000. "Tax Compliance Costs: Research Methodology and Empirical Evidence from Australia," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 229-52, June.
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    14. Kirchler, Erich & Hoelzl, Erik & Wahl, Ingrid, 2008. "Enforced versus voluntary tax compliance: The "slippery slope" framework," Journal of Economic Psychology, Elsevier, vol. 29(2), pages 210-225, April.
    15. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, August.
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