Does the sole description of a tax authority affect tax evasion? The impact of described coercive and legitimate power.

Barbara Hartl, Eva Hofmann, Martina Hartner-Tiefenthaler, Katharina Gangl, Erich Kirchler

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Abstract

Following the classic economic model of tax evasion, taxpayers base their tax decisions on economic determinants, like fine rate and audit probability. Empirical findings on the relationship between economic key determinants and tax evasion are inconsistent and suggest that taxpayers may rather rely on their beliefs about tax authority’s power. Descriptions of the tax authority’s power may affect taxpayers’ beliefs and as such tax evasion. Experiment 1 investigates the impact of fines and beliefs regarding tax authority’s power on tax evasion. Experiments 2-4 are conducted to examine the effect of varying descriptions about a tax authority’s power on participants’ beliefs and respective tax evasion. It is investigated whether tax evasion is influenced by the description of an authority wielding coercive power (Experiment 2), legitimate power (Experiment 3), and coercive and legitimate power combined (Experiment 4). Further, it is examined whether a contrast of the description of power (low to high power; high to low power) impacts tax evasion (Experiments 2-4). Results show that the amount of fine does not impact tax payments, whereas participants’ beliefs regarding tax authority’s power significantly shape compliance decisions. Descriptions of high coercive power as well as high legitimate power affect beliefs about tax authority’s power and positively impact tax honesty. This effect still holds if both qualities of power are applied simultaneously. The contrast of descriptions has little impact on tax evasion. The current study indicates that descriptions of the tax authority, e.g., in information brochures and media reports, have more influence on beliefs and tax payments than information on fine rates. Methodically, these considerations become particularly important when descriptions or vignettes are used besides objective information.

Publisher Statement: This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited
Original languageEnglish
Article numbere0123355
Number of pages19
JournalPLoS ONE
Volume10
Issue number4
DOIs
Publication statusPublished - 29 Apr 2015

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Does the sole description of a tax authority affect tax evasion? The impact of described coercive and legitimate power. / Hartl, Barbara; Hofmann, Eva; Hartner-Tiefenthaler, Martina; Gangl, Katharina; Kirchler, Erich.

In: PLoS ONE, Vol. 10, No. 4, e0123355, 29.04.2015.

Research output: Contribution to journalArticle

Hartl, Barbara ; Hofmann, Eva ; Hartner-Tiefenthaler, Martina ; Gangl, Katharina ; Kirchler, Erich. / Does the sole description of a tax authority affect tax evasion? The impact of described coercive and legitimate power. In: PLoS ONE. 2015 ; Vol. 10, No. 4.
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