The interaction between trust and power: Effects on tax compliance and macroeconomic implications

Gaetano Lisi

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2014, vol. 53, issue C, 24-33

Abstract: This paper aims to formalise both the role of trust (in) and power (of) tax authorities as major determinants of tax compliance, and the interplay between trust and power and its influence on tax climate and overall tax compliance. Unlike the related literature that studies the role of the psychological determinants of individual tax compliance, this paper focuses on the macroeconomic implications of the “slippery slope” framework. The main finding is that trust-building actions are better than deterring measures. In a society where the tax authority respects the taxpayers and applies transparent and fair procedures, in fact, trust and tax compliance are higher, tax evasion is lower and thus the level of taxation can be reduced. Hence, firms open more vacancies, thus increasing the employment rate.

Keywords: Trust and power; Tax compliance; Tax climate; Job creation (search for similar items in EconPapers)
JEL-codes: A12 A13 E26 H26 K34 K42 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:53:y:2014:i:c:p:24-33

DOI: 10.1016/j.socec.2014.07.004

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