Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/214356 
Year of Publication: 
2006
Series/Report no.: 
CREMA Working Paper No. 2006-10
Publisher: 
Center for Research in Economics, Management and the Arts (CREMA), Basel
Abstract: 
In this paper, we develop the concept of a psychological tax contract that goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. Based on crowding theory, the impact of deterrence and re-wards on tax morale is discussed. As a contractual relationship implies duties and rights for each contract partner, sticking to the fiscal exchange paradigm between citizens and the state increases tax compliance. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to their tax payments as long as the political process is perceived to be fair and legitimate. At the procedural level, a friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.
Subjects: 
Tax Compliance
Positive and Negative Incentives
Responsive Regulation
JEL: 
H26
H73
D73
D78
Document Type: 
Working Paper

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