The Effect of Outcome Favorability and Fairness on Tax Compliance

27 Pages Posted: 29 Dec 2012

See all articles by Jonathan Farrar

Jonathan Farrar

Ryerson University

Linda Thorne

York University - Schulich School of Business

Date Written: December 28, 2012


The purpose of this paper is to study the role of outcome favorability on influencing the association between fairness and taxpayer compliance. Outcome favorability is whether taxpayers have a balance owing or refundable. We develop a model of tax compliance based on an integration of fairness heuristic theory (Lind 2001) with Rutte & Messick’s (1995) Model of Perceived Unfairness. Based on our model, we posit that taxpayers in a favorable tax payment position are more likely to comply with tax authorities than those in an unfavorable tax payment position, and perceptions of distributive and procedural fairness jointly moderate taxpayer compliance. Distributive fairness is whether taxpayers have paid their fair share of taxes, and procedural fairness is the even-handedness in procedures used to collect taxes. We conduct an experiment on 228 taxpayers. We find significant support for outcome favorability: compliance is significantly higher in favorable as compared to unfavorable tax positions. We also find that compliance is significantly higher under procedural fairness. Unexpectedly, we find that distributive fairness increases compliance only when outcomes are favorable. Implications for practice and research are discussed.

Keywords: tax fairness, outcome favorability, tax compliance

JEL Classification: C93, H26

Suggested Citation

Farrar, Jonathan and Thorne, Linda, The Effect of Outcome Favorability and Fairness on Tax Compliance (December 28, 2012). CAAA Annual Conference 2013. Available at SSRN: or

Jonathan Farrar (Contact Author)

Ryerson University ( email )

Ryerson University, 350 Victoria Street, Toronto
Toronto, Ontario M5B 2K3

Linda Thorne

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
416-736-2100, x30223 (Phone)

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information