The Effect of Divorce and Marriage Contracts on Tax Non-Compliance

Hoang Ha Nguyen Thi and Hoang Ha Nguyen Thi

FinanzArchiv: Public Finance Analysis, 2025, vol. 81, issue 2, 102-155

Abstract: This paper studies whether the landmark ruling "Radmacher v Granatino 2010" changed tax non-compliance by married self-employed individuals in the UK through an increase in the enforceability of marriage contracts. I argue that the probability of divorce and the probability of marriage contracts being enforceable influence married self-employed individuals' tax non-compliance behaviour as they try to hide income from their spouses. Using a theoretical model, I show that a higher probability of marriage contract en-forceability leads to less income being hidden, while a higher probability of divorce results in more concealment. Additionally, the model predicts that higher tax rates in-crease the incentive to underreport income. A difference-in-differences analysis comparing married self-employed and married employed households in the UK suggests that the Radmacher v Granatino ruling however did not seem to significantly reduce income misreporting among married self-employed households.

Keywords: tax non-compliance; marriage; divorce; marriage contract; family (search for similar items in EconPapers)
JEL-codes: H26 J12 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1628/fa-2025-0010

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