Do Better Tax Agency Services Improve Taxpayer Compliance? Evidence from Germany

50 Pages Posted: 23 Dec 2020 Last revised: 12 Mar 2021

See all articles by Kay Blaufus

Kay Blaufus

Leibniz Universität Hannover

Frank Hechtner

Friedrich-Alexander-Universität Erlangen-Nürnberg

Janine Jarzembski

Leibniz Universität Hannover - Faculty of Economics and Management

Date Written: December 17, 2020

Abstract

In many countries, tax agencies are following OECD recommendations and are improving their services to increase voluntary tax compliance. Using a survey of 10,000 individual German taxpayers, we find that better service interaction quality (SIQ) is indeed positively associated with tax compliance. However, there is great heterogeneity in this effect. First, improving SIQ mainly affects the tax compliance of self-preparers who have low tax knowledge and high tax morale, suggesting that tax agency services reduce the unintentional mistakes of these taxpayers. Second, our results show a positive association of SIQ with tax compliance when the perceived coercive power of the tax office is high, suggesting that deterrence and service provision are complementary instruments for increasing tax compliance. Furthermore, an increase in perceived SIQ is associated with a reduction in the probability of appeal. Thus, better services also help to significantly reduce the tax controversy costs for tax administrations and taxpayers.

Keywords: Tax Compliance; Service Paradigm; Tax Enforcement; Behavioral Taxation

JEL Classification: M40, M48, H26, H30

Suggested Citation

Blaufus, Kay and Hechtner, Frank and Jarzembski, Janine, Do Better Tax Agency Services Improve Taxpayer Compliance? Evidence from Germany (December 17, 2020). Available at SSRN: https://ssrn.com/abstract=3750859 or http://dx.doi.org/10.2139/ssrn.3750859

Kay Blaufus (Contact Author)

Leibniz Universität Hannover ( email )

Institut für Betriebswirtschaftliche Steuerlehre
Koenigsworther Platz 1
Hannover, 30167
Germany

Frank Hechtner

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Nürnberg, 90403
Germany

Janine Jarzembski

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

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