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

Hartl B, Hofmann E, Gangl K, Hartner-Tiefenthaler M, Kirchler E - PLoS ONE (2015)

Bottom Line: Results show that the amount of fine does not impact tax payments, whereas participants' beliefs regarding tax authority's power significantly shape compliance decisions.This effect still holds if both qualities of power are applied simultaneously.Methodically, these considerations become particularly important when descriptions or vignettes are used besides objective information.

View Article: PubMed Central - PubMed

Affiliation: University of Vienna, Vienna, Austria.

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.

No MeSH data available.


Related in: MedlinePlus

Experiment 2.The impact of low and high coercive power on relative tax payments before and after the change in tax authority. Note. lcp … low coercive power, hcp … high coercive power.
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pone.0123355.g001: Experiment 2.The impact of low and high coercive power on relative tax payments before and after the change in tax authority. Note. lcp … low coercive power, hcp … high coercive power.

Mentions: To test whether coercive power has an impact on tax payments, again a repeated measure regression was conducted, analyzing all 40 periods of taxpaying. The model with all variables significantly predicts tax payments, F(26, 119) = 5.10, p < .001, R2 = .15. As expected, there is a significant main effect of intensity of power, β = .14, t(119) = 2.64, p = .009, with higher tax payments in conditions with high coercive power than with low coercive power. In addition, there is a significant main effect of sequence, β = .07, t(119) = 3.22, p = .002, with higher tax payments in the second sequence than in the first sequence (Fig 1). The other main effects and interaction effects do not reach significance, p > .20. Therefore, descriptions of coercive power impact tax payments. Table 2 provides the results for the repeated measure regression for all three experiments.


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

Hartl B, Hofmann E, Gangl K, Hartner-Tiefenthaler M, Kirchler E - PLoS ONE (2015)

Experiment 2.The impact of low and high coercive power on relative tax payments before and after the change in tax authority. Note. lcp … low coercive power, hcp … high coercive power.
© Copyright Policy
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC4414547&req=5

pone.0123355.g001: Experiment 2.The impact of low and high coercive power on relative tax payments before and after the change in tax authority. Note. lcp … low coercive power, hcp … high coercive power.
Mentions: To test whether coercive power has an impact on tax payments, again a repeated measure regression was conducted, analyzing all 40 periods of taxpaying. The model with all variables significantly predicts tax payments, F(26, 119) = 5.10, p < .001, R2 = .15. As expected, there is a significant main effect of intensity of power, β = .14, t(119) = 2.64, p = .009, with higher tax payments in conditions with high coercive power than with low coercive power. In addition, there is a significant main effect of sequence, β = .07, t(119) = 3.22, p = .002, with higher tax payments in the second sequence than in the first sequence (Fig 1). The other main effects and interaction effects do not reach significance, p > .20. Therefore, descriptions of coercive power impact tax payments. Table 2 provides the results for the repeated measure regression for all three experiments.

Bottom Line: Results show that the amount of fine does not impact tax payments, whereas participants' beliefs regarding tax authority's power significantly shape compliance decisions.This effect still holds if both qualities of power are applied simultaneously.Methodically, these considerations become particularly important when descriptions or vignettes are used besides objective information.

View Article: PubMed Central - PubMed

Affiliation: University of Vienna, Vienna, Austria.

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.

No MeSH data available.


Related in: MedlinePlus