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Tax Evasion in Switzerland: The Roles of Deterrence and Tax Morale

  • Lars P. Feld
  • Bruno S. Frey

The traditional economic approach to tax evasion does not appear to be particularly successful in explaining the extent of tax compliance. We argue instead that a psychological tax contract which establishes a fiscal exchange between the state and the citizens shapes tax compliance to a large extent. In that respect, a case study of Switzerland is useful because the small size of the cantons and their direct democratic political systems procedurally establish a close exchange relationship between taxpayers and tax authorities. In this paper, evidence is discussed on how tax evasion and tax morale in Switzerland evolved over time. In addition, the impact of economic, legal, socio-demographic, psychological and institutional factors on Swiss tax evasion is discussed.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 284.

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Date of creation: Apr 2006
Date of revision:
Handle: RePEc:zur:iewwpx:284
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  1. Bordignon, Massimo, 1993. "A fairness approach to income tax evasion," Journal of Public Economics, Elsevier, vol. 52(3), pages 345-362, October.
  2. Benno Torgler & Christoph A. Schaltegger & Markus Schaffner, 2003. "Is Forgiveness Divine? A Cross-Culture Comparison of Tax Amnesties," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(III), pages 375-396, September.
  3. Benno Torgler, 2004. "Moral suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland," Economics of Governance, Springer, vol. 5(3), pages 235-253, November.
  4. Lars P. Feld & Bruno S. Frey, 2000. "Trust Breeds Trust: How Taxpayers are Treated," CESifo Working Paper Series 322, CESifo Group Munich.
  5. Charles Christian & Joel Slemrod & Marsha Blumenthal, 2001. "Taxpayer response to an increased probability of audit: Evidence from a controlled experiment in minnesota," Natural Field Experiments 00332, The Field Experiments Website.
  6. Feld, Lars P & Tyran, Jean-Robert, 2002. "Tax Evasion and Voting: An Experimental Analysis," Kyklos, Wiley Blackwell, vol. 55(2), pages 197-222.
  7. Falkinger, Josef, 1988. "Tax Evasion and Equity: A Theoretical Analysis," Public Finance = Finances publiques, , vol. 43(3), pages 388-95.
  8. Pommerehne, Werner W. & Frey, Bruno S., 1992. "The effects of tax administration on tax morale," Discussion Papers, Series II 191, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  9. Feld, Lars P, 2000. " Tax Competition and Income Redistribution: An Empirical Analysis for Switzerland," Public Choice, Springer, vol. 105(1-2), pages 125-64, October.
  10. Cullis, John G. & Lewis, Alan, 1997. "Why people pay taxes: From a conventional economic model to a model of social convention," Journal of Economic Psychology, Elsevier, vol. 18(2-3), pages 305-321, April.
  11. Werner W. Pommerehne, 1983. "Steuerhinterziehung und Schwarzarbeit als Grenzen der Staatstätigkeit," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 119(III), pages 261-284, September.
  12. Pommerehne, Werner W., 1978. "Institutional approaches to public expenditure : Empirical evidence from Swiss municipalities," Journal of Public Economics, Elsevier, vol. 9(2), pages 255-280, April.
  13. Alois Stutzer, . "Demokratieindizes für die Kantone der Schweiz," IEW - Working Papers 023, Institute for Empirical Research in Economics - University of Zurich.
  14. Eduardo Engel & James Hines, 2000. "Understanding Tax Evasion Dynamics," Econometric Society World Congress 2000 Contributed Papers 1117, Econometric Society.
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  16. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
  17. Torgler, Benno, 2005. "Tax morale and direct democracy," European Journal of Political Economy, Elsevier, vol. 21(2), pages 525-531, June.
  18. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
  19. Lars P. Feld & Bruno S. Frey, 2006. "Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation," IEW - Working Papers 287, Institute for Empirical Research in Economics - University of Zurich.
  20. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
  21. Hannelore Weck-Hannemann & Werner W. Pommerehne, 1989. "Einkommensteuerhinterziehung in der Schweiz: Eine empirische Analyse," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 125(IV), pages 515-556, December.
  22. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-53, July.
  23. Spicer, M W & Lundstedt, S B, 1976. "Understanding Tax Evasion," Public Finance = Finances publiques, , vol. 31(2), pages 295-305.
  24. Becker, Winfried & Buchner, Heinz-Jurgen & Sleeking, Simon, 1987. "The impact of public transfer expenditures on tax evasion : An experimental approach," Journal of Public Economics, Elsevier, vol. 34(2), pages 243-252, November.
  25. 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.
  26. Alm, James & Jackson, Betty R. & McKee, Michael, 1993. "Fiscal exchange, collective decision institutions, and tax compliance," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 285-303, December.
  27. Blumenthal, Marsha & Christian, Charles W. & Slemrod, Joel, 2001. "Do Normative Appeals Affect Tax Compliance? Evidence from a Controlled Experiment in Minnesota," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 125-38, March.
  28. Reckers, Philip M.J. & Sanders, Debra L. & Roark, Stephen J., 1994. "The Influence of Ethical Attitudes on Taxpayer Compliance," National Tax Journal, National Tax Association, vol. 47(4), pages 825-36, December.
  29. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
  30. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
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