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Fair Tax Evasion

  • Barth, Erling

    ()

    (Insitute for Social Research and Department of Economics, University of Oslo.)

  • Cappelen, Alexander W.

    ()

    (The Norwegian School of Economics and Business Administration.)

  • Ognedal, Tone

    ()

    (Dept. of Economics, University of Oslo)

In this paper we analyse how fairness considerations, in particular considerations of just income distribution, affect whether or not people believe tax evasion can be justified and their willingness to engage in tax evasion. Using data from the Norwegian “Hidden Labour Market Survey” we show that individuals with low wages or long working hours, individuals that are treated unfairly by most tax systems, have a higher probability of justifying tax evasion. The same individuals are also more willing to take home income without reporting it to the tax authorities. These results are consistent with a model in which individuals make a trade-off between economic gains and fairness considerations when they make decisions about tax evasion. Taken together our results suggest that considerations of fair income distribution are important for the analysis of tax evasion.

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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2006/Memo-07-2006.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 07/2006.

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Length: 30 pages
Date of creation: 25 Apr 2006
Date of revision:
Handle: RePEc:hhs:osloec:2006_007
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Brian Erard & Jonathan S. Feinstein, 1994. "Honesty and Evasion in the Tax Compliance Game," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 1-19, Spring.
  2. Barth, Erling & Ognedal, Tone, 2005. "Unreported Labour," IZA Discussion Papers 1893, Institute for the Study of Labor (IZA).
  3. Erik Schokkaert & Kurt Devooght, 2003. "Responsibility-sensitive fair compensation in different cultures," Social Choice and Welfare, Springer, vol. 21(2), pages 207-242, October.
  4. Fugazza, Marco & Jacques, Jean-Francois, 2004. "Labor market institutions, taxation and the underground economy," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 395-418, January.
  5. Reinganum, Jennifer F & Wilde, Louis L, 1986. "Equilibrium Verification and Reporting Policies in a Model of Tax Compliance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 739-60, October.
  6. Samuel Bowles & Herbert Gintis, 2000. "Reciprocity, Self-Interest and the Welfare State," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 26, pages 33-53.
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  8. Norman Frohlich & Joe Oppenheimer & Anja Kurki, 2004. "Modeling Other-Regarding Preferences and an Experimental Test," Public Choice, Springer, vol. 119(1_2), pages 91-117, 04.
  9. Cappelen, Alexander W. & Sørensen, Erik Ø. & Tungodden, Bertil, 2010. "Responsibility for what? Fairness and individual responsibility," European Economic Review, Elsevier, vol. 54(3), pages 429-441, April.
  10. E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar.
  11. Matthew Rabin & Richard H. Thaler, 2001. "Anomalies: Risk Aversion," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 219-232, Winter.
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  13. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
  14. Roemer, J.E., 1992. "A Pragmatic Theory of Responsibility for the Egalitarian Planner," Papers 391, California Davis - Institute of Governmental Affairs.
  15. Alexander W. Cappelen & Astri Drange Hole & Erik Ø Sørensen & Bertil Tungodden, 2007. "The Pluralism of Fairness Ideals: An Experimental Approach," American Economic Review, American Economic Association, vol. 97(3), pages 818-827, June.
  16. Boeri, Tito & Garibaldi, Pietro, 2006. "Shadow Sorting," CEPR Discussion Papers 5487, C.E.P.R. Discussion Papers.
    • Tito Boeri & Pietro Garibaldi, 2005. "Shadow Sorting," NBER Chapters, in: NBER International Seminar on Macroeconomics 2005, pages 125-163 National Bureau of Economic Research, Inc.
  17. Bordignon, Massimo, 1993. "A fairness approach to income tax evasion," Journal of Public Economics, Elsevier, vol. 52(3), pages 345-362, October.
  18. Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
  19. Wulf Gaertner & Lars Schwettmann, 2007. "Equity, Responsibility and the Cultural Dimension," Economica, London School of Economics and Political Science, vol. 74(296), pages 627-649, November.
  20. Sandmo, Agnar, 1981. "Income tax evasion, labour supply, and the equity--efficiency tradeoff," Journal of Public Economics, Elsevier, vol. 16(3), pages 265-288, December.
  21. Fleurbaey, Marc, 1995. "Equal Opportunity or Equal Social Outcome?," Economics and Philosophy, Cambridge University Press, vol. 11(01), pages 25-55, April.
  22. 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.
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