Coercion, Persuasion, and Tax Compliance: The Case of Large Corporate Taxpayers

Zakir Akhand () and Michael Hubbard ()
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Zakir Akhand: School of Business, University of Exeter, UK
Michael Hubbard: International Development Department, University of Birmingham, UK

Canadian Tax Journal, 2016, vol. 64, issue 1, 31-63

Abstract: To induce tax compliance, two opposite approaches are used: the coercive and the persuasive. Little attention has been paid in the literature to the comparative success of these two approaches. This article uses original survey data to assess the effectiveness of three coercive and three persuasive instruments used by the Large Taxpayer Unit of the Bangladesh National Board of Revenue to promote compliance by large corporate taxpayers. Using logistic regressions, we find that when instruments of either coercion or persuasion are used separately, they are less likely to improve the tax compliance of large corporate taxpayers than when both types of instruments are used in combination, although coercion seems the more powerful of the two. The findings may be relevant in other countries that rely heavily on tax revenue collected from large corporations, including Canada. Limitations of the study include the measurement of some variables using self-reported data and the assumption that no important causal constructs exist between the instruments of coercion and persuasion.

Keywords: Compliance; corporate income taxes; Bangladesh; tax administration; service; tax audits (search for similar items in EconPapers)
Date: 2016
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