Walking inside the Potential Tax Evader's Mind

Juan Carlos Molero and Francesc Pujol

No 01/05, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: The classical Allingham-Sandmo-Yitzhaki model explains tax evasion behavior based on the probability of being discovered, the amount of the fine imposed and the level of risk aversion. Nonetheless, empirical studies show that the decision and the level of tax evasion depends also on non economic considerations, usually named as the "psychological costs" associated to tax evasion. We build a theoretical model of tax evasion including non monetary considerations. We propose an empirical study on the determinants of the psychological costs of tax evasion, based on the theoretical taxonomy proposed by Lagares (1994). Data come from a questionnaire filled by 781 university students. The dependent variable is the percentage of students considering acceptable to evade taxes. Using a binomial logit model we find that the justification of tax evasion is statistically related with: the presence of grievance in absolute terms (those who feel that taxes are too high; waste of public funds) and grievances in relative terms (the suspected level of tax evasion by others, those accepting black economy labor). The sense of duty and the level of solidarity are also relevant factors, but in a lesser extent.

JEL-codes: H26 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2005-01-01
New Economics Papers: this item is included in nep-cbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published, Journal of Business Ethics, Volume 105 / 2012, pp. 151-162.

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