Social norms and tax compliance: Framing the decision to pay tax

John Cullis, Philip Jones and Antonio Savoia

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2012, vol. 41, issue 2, 159-168

Abstract: Observed levels of tax compliance are higher than predicted levels (when predictions are based on Allingham and Sandmo's neoclassical model of tax evasion). They are higher if social norms recognise the importance of compliance. But how do social norms frame decisions to pay tax? Can prospect theory be applied to shed insight into the way that social norms exert their influence? An analysis of questionnaire responses (from Italy and from the UK) suggests that they exert their influence by changing the reference points that individuals use when they code changes as ‘gains’, or ‘losses’. The evidence suggests that social norms frame the decision to pay tax by changing individuals’ perceptions of their entitlement to income. This consideration is important when designing policy to deter evasion.

Keywords: Taxation; Decision making; Prospect theory; National identity: education (search for similar items in EconPapers)
JEL-codes: H2 H29 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:41:y:2012:i:2:p:159-168

DOI: 10.1016/j.socec.2011.12.003

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