Tax Compliance Social Norms and Institutional Quality: An Evolutionary Theory of Public Good Provision

Panayiotis Nicolaides ()

No 46, Taxation Papers from Directorate General Taxation and Customs Union, European Commission

Abstract: This paper presents an evolutionary theory of public good provision. The framework analyses the relationship between endogenous tax compliance norms, formed by the interactions of rationally-bounded individuals in a network, and the quality of institutions that collect taxes and distribute the public good to the individuals. Conditions for the level of public good utility are derived and illustrated on the "Public Good Provision Hypersurface"; a two-dimensional manifold that describes the relationship between norms, institutional quality and public good provision. I show that the effectiveness of the government to collect taxes increases the determinacy of public good provision but does not ensure its maximisation, which depends also on the level of wasteful government expenditure. If the government is ineffective in performing audits, the welfare from public good provision becomes subject to social norms. Lastly, a condition is derived at which social norms of tax compliance can act as a substitute for enforcement and can result in the maximisation of public good utility.

Keywords: Taxation; Tax compliance; Social norms Public goods, Government waste (search for similar items in EconPapers)
JEL-codes: C73 H26 H41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-10
New Economics Papers: this item is included in nep-acc, nep-evo, nep-iue, nep-pbe, nep-soc and nep-upt
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tax:taxpap:0046

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