Does an Uncertain Tax System Encourage "Aggressive Tax Planning"?
"Aggressive tax planning" (ATP) is typically characterized as a tax scheme that reduces the effective tax rate of a particular type of income to a level below the one sought by fiscal policy for this income. One motivation often suggested for its use is the uncertainty in tax liabilities introduced by a complicated and ever changing tax system. In this paper, I examine the impact of an uncertainty on the use of such tax schemes; by implication, I also examine how a simpler and more stable tax system that reduced this uncertainty might affect ATP. In this analysis, I draw upon some of my own work on tax avoidance and tax evasion, and then I extend this work to the related but separate area of ATP. Importantly, I introduce and model both individual and group motivations, incorporating insights from behavioral economics in these new analyses. Taxpayers are clearly motivated in part by narrowly defined financial considerations as shaped by the tax, audit, and penalty rates that they face, all of which I classify as individual motivations. However, individuals are also often influenced by many other factors that go beyond self-interest and that have as their main foundation some aspects of social norms, morality, altruism, fairness, or the like. In their entirety, I lump these factors together as group motivations, and I argue that they are shaped by the dynamic social context in which, and the process by which, decisions emerge. My main conclusion is that there is much in theory to suggest that uncertainty leads to more use of ATP, especially when both individual and group motivations are considered.
|Date of creation:||Feb 2014|
|Contact details of provider:|| Postal: 206 Tilton Hall, New Orleans, LA 70118|
Phone: (504) 865-5321
Fax: (504) 865-5869
Web page: http://econ.tulane.edu
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James Alm & Benno Torgler, 2012.
"Do Ethics Matter? Tax Compliance and Morality,"
1207, Tulane University, Department of Economics.
- Kirchler,Erich, 2007. "The Economic Psychology of Tax Behaviour," Cambridge Books, Cambridge University Press, number 9780521876742, December.
- Benno Torgler & Markus Schaffner & Alison Macintyre, 2007.
"Tax Compliance, Tax Morale, and Governance Quality,"
International Center for Public Policy Working Paper Series, at AYSPS, GSU
paper0727, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Benno Torgler & Markus Schaffner & Alison Macintyre, 2007. "Tax Compliance, Tax Morale and Governance Quality," CREMA Working Paper Series 2007-17, Center for Research in Economics, Management and the Arts (CREMA).
- Benno Torgler & Markus Schaffner & Alison Macintyre, 2007. "Tax Compliance, Tax Morale And Governance Quality," School of Economics and Finance Discussion Papers and Working Papers Series 225, School of Economics and Finance, Queensland University of Technology.
- Joel Slemrod, 1989.
"The Return To Tax Simplification: an Econometric Analysis,"
Public Finance Review,
SAGE Publishing, vol. 17(1), pages 3-27, January.
- Joel Slemrod, 1985. "The Return to Tax Simplification: An Econometric Analysis," NBER Working Papers 1756, National Bureau of Economic Research, Inc.
- James Alm & Todd Cherry & Michael Jones & Michael McKee, 2011.
"Taxpayer Information Assistance Services and Tax Compliance Behavior,"
1101, Tulane University, Department of Economics.
- Alm, James & Cherry, Todd & Jones, Michael & McKee, Michael, 2010. "Taxpayer information assistance services and tax compliance behavior," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 577-586, August.
- Calvet Christian, Roberta & Alm, James, 2014.
"Empathy, sympathy, and tax compliance,"
Journal of Economic Psychology,
Elsevier, vol. 40(C), pages 62-82.
- Alm, James, 1988. "Uncertain Tax Policies, Individual Behavior, and Welfare," American Economic Review, American Economic Association, vol. 78(1), pages 237-245, March.
- Stephan Muehlbacher & Erich Kirchler & Herbert Schwarzenberger, 2011. "Voluntary versus enforced tax compliance: empirical evidence for the “slippery slope” framework," European Journal of Law and Economics, Springer, vol. 32(1), pages 89-97, August.
- Lars P. Feld & Bruno S. Frey, "undated".
"Trust Breeds Trust: How Taxpayers are Treated,"
IEW - Working Papers
098, Institute for Empirical Research in Economics - University of Zurich.
- Benno Torgler, 2007. "Tax Compliance and Tax Morale," Books, Edward Elgar Publishing, number 4096.
- Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-1352, December.
- Alm, James & McClelland, Gary H & Schulze, William D, 1999. "Changing the Social Norm of Tax Compliance by Voting," Kyklos, Wiley Blackwell, vol. 52(2), pages 141-171.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- James Alm, 2012.
"Measuring, explaining, and controlling tax evasion: lessons from theory, experiments, and field studies,"
International Tax and Public Finance,
Springer;International Institute of Public Finance, vol. 19(1), pages 54-77, February.
- James Alm, 2012. "Measuring, Explaining, and Controlling Tax Evasion: Lessons from Theory, Experiments, and Field Studies," Working Papers 1213, Tulane University, Department of Economics.
- Reinganum, Jennifer F & Wilde, Louis L, 1991.
"Equilibrium Enforcement and Compliance in the Presence of Tax Practitioners,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 7(1), pages 163-181, Spring.
- Reinganum, Jennifer F. & Wilde, Louis L., 1990. "Equilibrium Enforcement and Compliance in the Presence of Tax Practitioners," Working Papers 744, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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.
- James Alm & Erich Kirchler & Stephan Muehlbacher, 2012.
"Combining Psychology and Economics in the Analysis of Compliance: From Enforcement to Cooperation,"
Economic Analysis and Policy,
Elsevier, vol. 42(2), pages 133-152, September.
- 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.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-291, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Joseph E. Stiglitz, 1981.
"Utilitarianism and Horizontal Equity: The Case for Random Taxation,"
NBER Working Papers
0694, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June.
- 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.
- Erard, Brian & Feinstein, Jonathan S, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 70-89.
- Alm, James & Jackson, Betty & McKee, Michael, 1992. "Institutional Uncertainty and Taxpayer Compliance," American Economic Review, American Economic Association, vol. 82(4), pages 1018-1026, September.
- Erard, Brian, 1993. "Taxation with representation : An analysis of the role of tax practitioners in tax compliance," Journal of Public Economics, Elsevier, vol. 52(2), pages 163-197, September.
- Nigar Hashimzade & Gareth D. Myles & Binh Tran-Nam, 2013. "Applications Of Behavioural Economics To Tax Evasion," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 941-977, December.
- Brian Erard & Jonathan Feinstein, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Carleton Industrial Organization Research Unit (CIORU) 94-03, Carleton University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:tul:wpaper:1403. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rodrigo Aranda Balcazar)
If references are entirely missing, you can add them using this form.