Trust Breeds Trust: How Taxpayers are Treated

21 Pages Posted: 2 Apr 2001

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Bruno S. Frey

CREMA; University of Basel

Date Written: January 2002

Abstract

Tax compliance has been studied in economics by analysing the individual decision of a representative person between paying and evading taxes. A neglected aspect of tax compliance is the interaction of taxpayers and tax authorities. The relationship between the two actors can be understood as an implicit or "psychological" contract. The more strongly the political participation rights are developed, the more important this contract is, and the higher tax morale is. In this paper, empirical evidence based on a survey of tax authorities of the 26 Swiss states (cantons) is presented, indicating that the differences in the treatment of taxpayers by tax authorities can be explained by differences in political participation rights.

Keywords: Tax evasion, tax authority, tax compliance, direct democracy

JEL Classification: H26, H73, D73, D78

Suggested Citation

Feld, Lars P. and Frey, Bruno S., Trust Breeds Trust: How Taxpayers are Treated (January 2002). CESifo Working Paper Series No. 322; Zurich IEER Working Paper No. 98. Available at SSRN: https://ssrn.com/abstract=263351

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-W├╝rttemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bruno S. Frey

CREMA ( email )

S├╝dstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

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