Deterrence and Morale in Taxation: An Empirical Analysis

41 Pages Posted: 6 Nov 2002

See all articles by Bruno S. Frey

Bruno S. Frey

CREMA; University of Basel

Lars P. Feld

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

Date Written: August 2002

Abstract

The standard model of tax evasion based on the subjective expected utility maximization does not perform particularly well in econometric analyses: It predicts too little evasion and produces unsatisfactory econometric parameter estimates. The model is extended by looking at how the tax authority deals with the taxpayers. Based on econometric estimates, it is shown that taxpayers' tax morale is raised when the tax officials treat them with respect. In contrast, when tax officials solely rely on deterrence taxpayers tend to respond by actively trying to avoid taxation.

JEL Classification: H2, D6

Suggested Citation

Frey, Bruno S. and Feld, Lars P., Deterrence and Morale in Taxation: An Empirical Analysis (August 2002). CESifo Working Paper Series No. 760. Available at SSRN: https://ssrn.com/abstract=341380

Bruno S. Frey

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg 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

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