Norms, Enforcement, and Tax Evasion

Torsten Persson (), Timothy Besley and Anders Jensen

No 10372, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK, which led to widespread evasion. We also exploit a series of natural experiments due to narrow election outcomes, which induce shifts into single-majority local governments and lead to more vigorous enforcement of local taxes. The econometric results are consistent with the model?s main predictions on the dynamics of evasion. ?A widespread view among tax scholars holds that law enforcement does not explain why people pay taxes. The penalty for ordinary tax convictions is small; the probability of detection is trivial; so the expected sanction is small. Yet large numbers of Americans pay their taxes. ... Some scholars therefore conclude that the explanation for the tendency to pay taxes must be that people are obeying a norm ? presumably a norm of tax payment or a more general norm of law-abiding behavior.? Posner (2000, page 1782)

Keywords: Social norms; Tax evasion; Poll tax (search for similar items in EconPapers)
JEL-codes: H26 H71 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-iue, nep-pbe, nep-pub and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Related works:
Working Paper: Norms, enforcement, and tax evasion (2021)
Working Paper: Norms, Enforcement, and Tax Evasion (2019)
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