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Combining Psychology and Economics in the Analysis of Compliance: From Enforcement to Cooperation

Author

Listed:
  • Erich Kirchler

    () (Department of Applied Psychology: Work, Education and Economy, University of Vienna)

  • Stephan Muehlbacher

    () (Department of Applied Psychology: Work, Education and Economy, University of Vienna)

  • Katharina Gangl

    () (Department of Applied Psychology: Work, Education and Economy, University of Vienna)

  • Eva Hofmann

    () (Department of Applied Psychology: Work, Education and Economy, University of Vienna)

  • Christoph Kogler

    () (Department of Applied Psychology: Work, Education and Economy, University of Vienna)

  • Maria Pollai

    () (Department of Applied Psychology: Work, Education and Economy, University of Vienna)

  • James Alm

    () (Department of Economics, Tulane University)

Abstract

In tax compliance research, there has been a significant shift in research emphasis from the analysis of enforcement to the incorporation of trust-building measures that encourage cooperation. In this paper, we trace this shift. We first describe the four major "actors" in the tax compliance game and their complex interactions: taxpayers, elected government officials, appointed tax authorities (or the tax administration), and tax accountants. Second, we examine various perspectives on what determines the compliance decisions of individuals. We start with "economic" factors that are based on tax compliance as an individual decision under risk (e.g., audits and fines). We then move to factors based more on "psychology", like social norms, fairness, and interactions both between taxpayers and between taxpayers and the government. Indeed, over the past few decades the view of taxpayers has shifted from one in which an authoritarian government and its tax authority force citizens to pay their taxes under the threat of punishment, to a view in which both elected and appointed authorities provide the necessary services to enable compliance, and even more recently to a view of authorities and citizens cooperating with one another. Third, we present the "slippery slope" framework as a way of integrating economic and psychological aspects into a unified framework. We conclude with recommendations based on this framework that can improve compliance.

Suggested Citation

  • Erich Kirchler & Stephan Muehlbacher & Katharina Gangl & Eva Hofmann & Christoph Kogler & Maria Pollai & James Alm, 2012. "Combining Psychology and Economics in the Analysis of Compliance: From Enforcement to Cooperation," Working Papers 1212, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1212
    as

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    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
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    Cited by:

    1. repec:eee:joepsy:v:62:y:2017:i:c:p:1-16 is not listed on IDEAS
    2. James Alm, 2014. "Does an uncertain tax system encourage üaggressive tax planningý?," Economic Analysis and Policy, Elsevier, vol. 44(1), pages 30-38.
    3. repec:eee:ecanpo:v:55:y:2017:i:c:p:25-34 is not listed on IDEAS
    4. Gobena, Lemessa Bayissa & Van Dijke, Marius, 2016. "Power, justice, and trust: A moderated mediation analysis of tax compliance among Ethiopian business owners," Journal of Economic Psychology, Elsevier, vol. 52(C), pages 24-37.

    More about this item

    Keywords

    tax evasion; behavioral economics; social norms; slippery slope;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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