Analyzing Taxpayers' Tax Behavior with a Behavioral Economics Approach: Examining the Willingness to Pay Taxes through a Discrete Choice Test

Mozhgan Moallemi, Yeganeh Mousavi Jahromi, Sahar Dehghan and Ehsanallah Mohammadrezaei
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Mozhgan Moallemi: Assistant Professor of Economics, Department of Economics, Payame Noor University, Tehran, Iran
Yeganeh Mousavi Jahromi: Professor of Economics, Department of Economics, Payame Noor University, Tehran, Iran
Sahar Dehghan: Iranian National Tax Administration, Tehran, Iran

Quarterly Journal of Applied Theories of Economics, 2025, vol. 12, issue 4, 159-176

Abstract: Combating tax evasion is one of the primary responsibilities of an economic system and, at its core, the tax administration of every country. Behavioral economics offers methods for achieving this goal. Since behavior is part of culture and culture itself is shaped by habits, if individuals can be led to believe that tax compliance is a correct habit, they will internalize it as a permanent behavior. Given that no structured research has yet been conducted on the role of habit strength in tax behavior, this study aimed to identify behavioral factors that influence the transformation of the habit of tax evasion into that of tax compliance. After reviewing the relevant literature and interviewing tax experts and representatives of various professional associations, eight cognitive biases were identified as components influencing tax behavior. Considering the number of levels for each component, 21,000 possible choice combinations were generated. Therefore, based on the D-efficient design method and using SAS software, ten choice cards were designed. Ultimately, after collecting completed questionnaires from real (individual) taxpayers in the city of Tabriz who were active during 2023 and 2024, the data were analyzed using the ordered logit model in STATA 13 software. The results revealed that cognitive biases, including the endowment effect, nudge effect, prospect theory, and present bias, significantly impact taxpayers’ behavior. Policymakers can leverage these cognitive biases to break the old habit loop and establish a new one oriented toward tax compliance.

Keywords: Tax Evasion; Behavioral Economics; Tax Compliance; Habit Formation; Tabriz (search for similar items in EconPapers)
JEL-codes: C83 D03 D90 H20 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ris:qjatoe:023060

DOI: 10.22034/ecoj.2025.67336.3434

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