Rationality vs. Emotions: The Case of Tax Ethics and Compliance

32 Pages Posted: 5 May 2011

See all articles by Boris Maciejovsky

Boris Maciejovsky

Imperial College London

Herbert Schwarzenberger

University of Vienna

Erich Kirchler

University of Vienna - Faculty of Psychology

Date Written: May 4, 2011

Abstract

Businesses that rely heavily on cash transactions have been found to be particularly susceptible to low tax ethics. Recent research indicates that cash is a highly powerful and tempting reward, which elicits a strong emotional response. In this paper we investigate how emotions affect tax ethics in a series of experimental studies. Specifically, we show that affective priming and the ease with which moral judgments are retrieved moderate tax ethics. We also show that the relative effectiveness of deterrence, such as audit probabilities and tax fines, is moderated by affect. These results point towards a complex picture of tax ethics, requiring a multifaceted policy approach that emphasizes not only enforcement, but also cognitive and affective aspects of human behavior.

Keywords: affect, cognition, emotion, rationality, tax evasion, tax ethics, tax compliance

JEL Classification: C91, H20, H26

Suggested Citation

Maciejovsky, Boris and Schwarzenberger, Herbert and Kirchler, Erich, Rationality vs. Emotions: The Case of Tax Ethics and Compliance (May 4, 2011). Available at SSRN: https://ssrn.com/abstract=1831077 or http://dx.doi.org/10.2139/ssrn.1831077

Boris Maciejovsky (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Herbert Schwarzenberger

University of Vienna ( email )

Bruenner Strasse 72
Vienna, Vienna 1090
Austria

Erich Kirchler

University of Vienna - Faculty of Psychology ( email )

Universitaetsstrasse 7
Vienna, A-1010
Austria
+43 1 42 7747332 (Phone)
+43 1 42 7747339 (Fax)

HOME PAGE: http://homepage.univie.ac.at/erich.kirchler

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