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Tax compliance as the result of a psychological tax contract: the role of incentives and responsive regulation


Feld, Lars P; Frey, Bruno S (2007). Tax compliance as the result of a psychological tax contract: the role of incentives and responsive regulation. Law and Policy, 29(1):102-120.

Abstract

A psychological tax contract goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. As a contractual relationship implies duties and rights for each contract party, tax compliance is increased by sticking to the fiscal exchange paradigm between citizens and the state. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to tax payments as long as the political process is perceived to be fair and legitimate. Moreover, friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.

Abstract

A psychological tax contract goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. As a contractual relationship implies duties and rights for each contract party, tax compliance is increased by sticking to the fiscal exchange paradigm between citizens and the state. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to tax payments as long as the political process is perceived to be fair and legitimate. Moreover, friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Date:January 2007
Deposited On:28 Mar 2008 08:44
Last Modified:05 Apr 2016 12:22
Publisher:Wiley-Blackwell
ISSN:0265-8240
Additional Information:The definitive version is available at www.blackwell-synergy.com
Publisher DOI:https://doi.org/10.1111/j.1467-9930.2007.00248.x

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