Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-23T16:04:12.987Z Has data issue: false hasContentIssue false
  • English
  • Français

Tax Compliance and Perceptions of the Risks of Detection and Criminal Prosecution

Published online by Cambridge University Press:  01 July 2024

Steven Klepper  and
Daniel Nagin
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

In this paper we use a survey concerning a hypothetical taxpayer to analyze how certain features of the enforcement of the tax laws shape perceptions of the risks of detection and penalties for tax noncompliance. We also examine the effects of these perceptions on intended noncompliance behavior. Our findings provide strong support for various hypotheses concerning the effect of the enforcement process on perceptions. We also find, in contrast to prior results, that the perceived risk of criminal prosecution appears to act as a powerful deterrent to noncompliance. We explain why earlier studies might have failed to detect a deterrent role for the severity of punishment.

Type
Research Article
Information
Law & Society Review , Volume 23 , Issue 2 , 1989 , pp. 209 - 240
Copyright
Copyright © 1989 The Law and Society Association.

Footnotes

This material is based upon work supported by the National Science Foundation and the Internal Revenue Service under Grant No. SES 8709573. We thank Kristin Johnston for her research assistance and Shari Diamond, Harold Grasmick, Ray Paternoster, John Scholz, Ann Witte, and two anonymous referees for their helpful comments.

References

COOK, Philip (1986) “The Demand and Supply of Criminal Opportunities,” in Tonry, and Morris, (eds.), Crime and Justice: An Annual Review. Chicago: University of Chicago Press.Google Scholar
CORNISH, Derek B., and Ronald V., CLARK (1986) The Reasoning Criminal. New York: Springer-Verlag.CrossRefGoogle Scholar
DUBIN, Jeffrey A., and Louis L., WILDE (in press). “An Empirical Analysis of Federal Income Tax Auditing and Compliance,” National Tax Journal.Google Scholar
GRAETZ, Michael J., Jennifer R., REINGANUM, and Louis L., WILDE (1986) “The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement,” 2 Journal of Law, Economics, and Organization 1.Google Scholar
GRASMICK, Harold G., and George J., BRYJAK (1980) “The Deterrent Effect of Perceived Severity of Punishment,” 59 Social Forces 471.Google Scholar
GRASMICK, Harold G., and Wilbur J., SCOTT (1982) “Tax Evasion and Mechanisms of Social Control: A Comparison with Grand and Petty Theft,” 2 Journal of Economic Psychology 213.Google Scholar
JACKSON, Betty, and Vallerie, MILLIRON (1986) “Tax Compliance Research: Problems and Prospects,” 5 Journal of Accounting Literature 125.Google Scholar
JENSEN, Gary F., Maynard L., ERICKSON, and Jack P., GIBBS (1978) “Perceived Risk of Punishment and Self-Reported Delinquency,” 57 Social Forces 57.CrossRefGoogle Scholar
KINSEY, Karyl (1984) “Survey Data on Tax Compliance: A Compendium and Review,” Working Paper 84-1, Tax Compliance Project, American Bar Foundation, Chicago.Google Scholar
KINSEY, Karyl, and Kent, SMITH (1987) “Income Tax Cheating: Opportunities, Preferences, and Sanctions,” Working Paper 87-1, Tax Compliance Project, American Bar Foundation, Chicago.Google Scholar
KLEPPER, Steven, and Daniel, NAGIN (in press a) “The Anatomy of Tax Evasion,” Journal of Law, Economics, and Organization.Google Scholar
KLEPPER, Steven (in press b) “The Criminal Deterrence Literature: Implications for Research on Taxpayer Compliance,” in Scholz, Roth, and Witte, (eds.), Paying Taxes: An Agenda for Compliance Research. Philadelphia: University of Pennsylvania Press.Google Scholar
MADDALA, G.S. (1983) Limited-Dependent and Qualitative Variables in Econometrics. New York: Cambridge University Press.CrossRefGoogle Scholar
MASON, Robert (1987) “A Communication Model of Taxpayer Honesty,” 9 Law and Policy 246.Google Scholar
MASON, Robert, and Lyle D., CALVIN (1984) “Public Confidence and Admitted Tax Evasion,” 37 National Tax Journal 489.Google Scholar
MASON, Robert (1978) “A Study of Admitted Tax Evasion,” 13 Law & Society Review 73.Google Scholar
PATERNOSTER, Raymond, Linda E., SALTZMAN, Gordon P., WALDO, and Theodore G., CHIRICOS (1983) “Perceived Risk and Social Control: Do Sanctions Really Deter?” 17 Law & Society Review 457.Google Scholar
SCOTT, Wilbur, J., and Harold G., GRASMICK (1981) “Deterrence and Income Tax Cheating: Testing Interaction Hypotheses in Utilitarian Theories,” 17 Journal of Applied Behavioral Science 395.Google Scholar
SMITH, Kent W., and Karyl A., KINSEY (1987). “Understanding Taxpayer Behavior: A Conceptual Framework with Implications for Research,” 21 Law and Society Review 639.Google Scholar
SPICER, Michael W., and S.B., LUNDSTEDT (1976) “Understanding Tax Evasion,” 31 Public Finance 295.Google Scholar
THURMAN, Quint C., Craig St., JOHN, and Lisa, RIGGS (1984) “Neutralization and Tax Evasion: How Effective Would a Moral Appeal Be in Improving Compliance to Tax Laws?” 6 Law and Policy 309.Google Scholar
WITTE, Ann D., and Diane F., WOODBURY (1985) “The Effect of Tax Laws and Tax Administration on Tax Compliance: The Case of the U.S. Individual Income Tax,” 38 National Tax Journal 1.Google Scholar