The Role of Social Norms in Tax Compliance: Theoretical Overview and Practical Implications

Authors

  • Diana Onu Associate Research Fellow, Tax Administration Research Centre, University of Exeter, Exeter, Devon, U.K.
  • Lynne Oats Professor of Taxation and Accounting and Deputy Director of the Tax Administration Research Centre, University of Exeter, Exeter, Devon, U.K.

Abstract

Within fields as diverse as psychology, economics, sociology, and law, tax researchers have become increasingly interested in how societal norms influence individuals to comply (or not) with tax laws. However, it is not always apparent how these insights may contribute to tax administration and tax policy. First, this paper will present an overview of current research on social norms and tax compliance, bringing together results from a variety of research traditions. Rather than aiming to provide an exhaustive presentation of all research on social norms and compliance, we aim to highlight primary trends in past research, provide conceptual clarification, and highlight future research directions. Second, the paper will discuss avenues for employing knowledge about social norms in improving tax compliance. We review the social norms approach to changing individuals’ behaviour, including insights from relevant health and environmental campaigns, and discuss several options for designing future social norms campaigns for tax compliance, including potential caveats.

References

Adams, C., & Webley, P. (2001). Small business owners’ attitudes on VAT compliance in the UK. Journal of Economic Psychology, 22(2), 195–216. doi:10.1016/S0167-4870(01)00029-0

Ajzen, I. (1991). The theory of planned behaviour. Organizational Behaviour and Human Decision Processes, 50(2), 179–211. doi:10.1016/0749-5978(91)90020-T

Ajzen, I., & Fishbein, M. (1980). Understanding attitudes and predicting social behaviour. Prentice-Hall.

Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: A theoretical analysis. Journal of Public Economics, 1, 323–338.

Alm, J., Kirchler, E., Muehlbacher, S., Gangl, K., Hofmann, E., Kogler, C., & Pollai, M. (2012). Rethinking the Research Paradigms for Analyzing Tax Compliance Behaviour (Working Paper No. 1210). Tulane University, Department of Economics. Retrieved from http://ideas.repec.org/p/tul/wpaper/1210.html

Alm, J., McClelland, G. H., & Schulze, W. D. (1999). Changing the Social Norm of Tax Compliance by Voting. Kyklos, 52(2), 141–171. doi:10.1111/j.1467-6435.1999.tb01440.x

Alm, J., Sanchez, I., & de Juan, A. (1995). Economic and Noneconomic Factors in Tax Compliance. Kyklos, 48(1), 3–18.

Alm, J., & Torgler, B. (2006). Culture differences and tax morale in the United States and in Europe. Journal of Economic Psychology, 27(2), 224–246. doi:10.1016/j.joep.2005.09.002

Alm, J., & Torgler, B. (2011). Do ethics matter? Tax compliance and morality. Journal of Business Ethics, 101(4), 635–651.

Applying behavioural insights to reduce fraud, error and debt. (2012). Cabinet Office Behavioural Insights Team. Retrieved from www.cabinetoffiœce.gov.uk

Asch, S. E. (1955). Opinions and social pressure. Readings about the Social Animal, 17–26.

Ashby, J. S., Haslam, S. A., & Webley, P. (2009). The distinct role of group-central and group-peripheral norms in taxpaying behaviour. The Journal of Socio-Economics, 38(2), 230–237. doi:10.1016/j.socec.2008.11.001

Ashby, J. S., & Webley, P. (2008). ‘But everyone else is doing it’: a closer look at the occupational taxpaying culture of one business sector. Journal of Community & Applied Social Psychology, 18(3), 194–210. doi:10.1002/casp.919

Ashby, J. S., Webley, P., & Haslam, A. S. (2009). The role of occupational taxpaying cultures in taxpaying behaviour and attitudes. Journal of Economic Psychology, 30(2), 216–227. doi:10.1016/j.joep.2008.08.005

Barham, E., & Fox, K. (2011). Compliance Perceptions Survey - Individuals 2008-10. HM Revenue and Customs Research Report 156. Retrieved from http://www.hmrc.gov.uk/research/cps-ind-report156.pdf

Beers, T., LoPresti, E., & San Juan, E. (2012). Factors influencing voluntary compliance by small businesses: preliminary survey results. Taxpayer Advocate Service - 2012 Annual Report to Congress. Retrieved from http://www.taxpayeradvocate.irs.gov/userfiles/file/Full-Report/Research-Studies-Factors-Influencing-Voluntary-Compliance-by-Small-Businesses-Preliminary-Survey-Results.pdf#page=38

Beers, T., Nestor, M., & San Juan, E. (2013). Small Business Compliance Further Analysis of Influential Factors. National Taxpayer Advocate. Retrieved from http://www.taxpayeradvocate.irs.gov/userfiles/file/2013FullReport/Small-Business-Compliance-Further-Analysis-of-Influential-Factors.pdf

Bernthal, M. J., Rose, R. L., & Kaufman, P. (2006). When norms collide: Normative conflict in the processing of public service announcements. Journal of Nonprofit & Public Sector Marketing, 16(1-2), 21–39.

Blanton, H., Köblitz, A., & McCaul, K. D. (2008). Misperceptions about norm misperceptions: Descriptive, injunctive, and affective ‘social norming’ efforts to change health behaviours. Social and Personality Psychology Compass, 2(3), 1379–1399.

Blumenthal, M., Christian, C. W., & Slemrod, J. B. (2001). Do Normative Appeals Affect Tax Compliance? Evidence from a Controlled Experiment in Minnesota (SSRN Scholarly Paper No. ID 269235). Rochester, NY: Social Science Research Network. Retrieved from http://papers.ssrn.com/abstract=269235

Bobek, D. D., Hageman, A. M., & Kelliher, C. F. (2013). Analysing the Role of Social Norms in Tax Compliance Behaviour. Journal of Business Ethics, 115(3), 451–468. doi:10.1007/s10551-012-1390-7

Bobek, D. D., & Hatfield, R. C. (2003). An Investigation of the Theory of Planned Behavior and the Role of Moral Obligation in Tax Compliance. Behavioural Research in Accounting, 15(1), 13–38. doi:10.2308/bria.2003.15.1.13

Bobek, D. D., Roberts, R. W., & Sweeney, J. T. (2007). The Social Norms of Tax Compliance: Evidence from Australia, Singapore, and the United States. Journal of Business Ethics, 74(1), 49–64. doi:10.1007/s10551-006-9219-x

Bosco, L., & Mittone, L. (1997). Tax Evasion and Moral Constraints: some Experimental Evidence. Kyklos, 50(3), 297–324. doi:10.1111/1467-6435.00018

Braithwaite, V. A. (2009). Defiance in Taxation and Governance: Resisting and dismissing authority in a democracy. Edward Elgar Publishing.

Cialdini, R. B., Demaine, L. J., Sagarin, B. J., Barrett, D. W., Rhoads, K., & Winter, P. L. (2006). Managing social norms for persuasive impact. Social Influence, 1(1), 3–15.

Cialdini, R. B., & Goldstein, N. J. (2004). Social Influence: Compliance and Conformity. Annual Review of Psychology, 55(1), 591–621. doi:10.1146/annurev.psych.55.090902.142015

Cialdini, R. B., & Trost, M. R. (1998). Social influence: Social norms, conformity and compliance. The Handbook of Social Psychology, Vols. 1 and 2 (4th Ed.), 151–192.

Cummings, R. G., Martinez-Vazquez, J., & McKee, M. (2001). Cross Cultural Comparisions of Tax Compliance Behavior (International Center for Public Policy Working Paper Series, at AYSPS, GSU No. paper0103). International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University. Retrieved from http://ideas.repec.org/p/ays/ispwps/paper0103.html

Cummings, R. G., Martinez-Vazquez, J., McKee, M., & Torgler, B. (2006). Effects of Tax Morale on Tax Compliance: Experimental and Survey Evidence. Retrieved from http://escholarship.org/uc/item/8sh2w9fp#page-10

Deutsch, M., & Gerard, H. B. (1955). A study of normative and informational social influences upon individual judgment. The Journal of Abnormal and Social Psychology, 51(3), 629.

Durkheim, É. (1949). The division of labor in society. Illinois: Free Press.

Ellickson, R. C. (1998). Law and Economics Discovers Social Norms. Journal of Legal Studies, 27, 537.

Fehr, E., & Fischbacher, U. (2004). Social norms and human cooperation. Trends in Cognitive Sciences, 8(4), 185–190.

Fehr, E., Fischbacher, U., & Gächter, S. (2002). Strong reciprocity, human cooperation, and the enforcement of social norms. Human Nature, 13(1), 1–25.

Hanno, D. M., & Violette, G. R. (1996). An analysis of moral and social influences on taxpayer behaviour. Behavioral Research in Accounting, 8, 57–75.

Hashimzade, N., Myles, G. D., Page, F., & Rablen, M. D. (2013). Social networks and occupational choice: The endogenous formation of attitudes and beliefs about tax compliance. Journal of Economic Psychology, 40, 134-146. doi:10.1016/j.joep.2012.09.002

Hashimzade, N., Myles, G. D., & Tran-Nam, B. (2013). Applications of Behavioural Economics to Tax Evasion. Journal of Economic Surveys, 27(5), 941–977. doi:10.1111/j.1467-6419.2012.00733.x

Hessing, D. J., Elffers, H., & Weigel, R. H. (1988). Exploring the limits of self-reports and reasoned action: An investigation of the psychology of tax evasion behaviour. Journal of Personality and Social Psychology, 54(3), 405–413. doi:10.1037/0022-3514.54.3.405

Hine, C. (2000). Virtual Ethnography. SAGE.

Individuals prioritisation: An investigation into segmentation of the Individuals customer base. (2009). HM Revenue and Customs. Retrieved from http://www.hmrc.gov.uk/research/individuals-prioritisation-publication.pdf

Kirchler, E. (2007). The economic psychology of tax behaviour. Cambridge University Press.

Kornhauser, M. E. (2008). Normative and cognitive aspects of tax compliance: Literature review and recommendations for the IRS regarding individual taxpayers. In 2007 Annual Report to Congress (Vol. 138, pp. 138–180).

Lapinski, M. K., & Rimal, R. N. (2005). An explication of social norms. Communication Theory, 15(2), 127–147.

Legge, J. (2001). The Chinese Classics. Simon Publications LLC.

Marx, K. (1988). Economic and Philosophic Manuscripts Of 1844. Prometheus Books.

Miller, D. T. (1999). The norm of self-interest. American Psychologist, 54(12), 1053–1060. doi:10.1037/0003-066X.54.12.1053

Miller, D. T., & Prentice, D. A. (1996). The construction of social norms and standards. Retrieved from http://doi.apa.org/psycinfo/1996-98402-026

National Social Norms Institute. (n.d.). Retrieved 27 January 2014, from http://www.socialnorms.org

Nolan, J. M., Schultz, P. W., Cialdini, R. B., Goldstein, N. J., & Griskevicius, V. (2008). Normative Social Influence is Underdetected. Personality and Social Psychology Bulletin, 34(7), 913–923. doi:10.1177/0146167208316691

Oats, L. (2012). Taxation: A Fieldwork Research Handbook. Routledge.

Ostrom, E. (2000). Collective action and the evolution of social norms. The Journal of Economic Perspectives, 14(3), 137–158.

doi: 10.1257/jep.14.3.137

Perkins, H. W., & Berkowitz, A. D. (1986). Perceiving the Community Norms of Alcohol Use among Students: Some Research Implications for Campus Alcohol Education Programming*. Substance Use & Misuse, 21(9-10), 961–976.

Pickhardt, M., & Prinz, A. (2013). Behavioural dynamics of tax evasion – A survey. Journal of Economic Psychology, 40, 1-19. doi:10.1016/j.joep.2013.08.006

Porcano, T. M. (1988). Correlates of tax evasion. Journal of Economic Psychology, 9(1), 47–67. doi:10.1016/0167-4870(88)90031-1

Posner, R. A. (1997). Social Norms and the Law: An Economic Approach. The American Economic Review, 87(2), 365–369.

Schmölders, G. (1959). Fiscal Psychology: A new branch of public finance. National Tax Journal, 12(4), 340–345.

Schultz, P. W., Nolan, J. M., Cialdini, R. B., Goldstein, N. J., & Griskevicius, V. (2007). The Constructive, Destructive, and Reconstructive Power of Social Norms. Psychological Science, 18(5), 429–434. doi:10.1111/j.1467-9280.2007.01917.x

Schwartz, R. D., & Orleans, S. (1967). On Legal Sanctions. The University of Chicago Law Review, 34(2), 274–300. doi:10.2307/1598934

Sigala, M., Burgoyne, C. B., & Webley, P. (1999). Tax communication and social influence: evidence from a British sample. Journal of Community & Applied Social Psychology, 9(3), 237–241. doi:10.1002/(SICI)1099-1298(199905/06)9:3<237::AID-CASP516>3.0.CO;2-7

Smith, J. R., & Louis, W. R. (2008). Do as we say and as we do: the interplay of descriptive and injunctive group norms in the attitude-behaviour relationship. The British Journal of Social Psychology / the British Psychological Society, 47(Pt 4), 647–666. doi:10.1348/014466607X269748

Smith, K. W., & Kinsey, K. A. (1987). Understanding Taxpaying Behavior: A Conceptual Framework with Implications for Research. Law & Society Review, 21(4), 639–663. doi:10.2307/3053599

Social Norms and Networking: Research into the tax compliance of the self-employed. (2010). HM Revenue and Customs.

Stalans, L. J., Kinsey, K. A., & Smith, K. W. (1991). Listening to Different Voices: Formation of Sanction Beliefs and Taxpaying Norms. Journal of Applied Social Psychology, 21(2), 119–138. doi:10.1111/j.1559-1816.1991.tb00492.x

Torgler, B. (2002). Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments. Journal of Economic Surveys, 16(5), 657–683. doi:10.1111/1467-6419.00185

Torgler, B. (2005). Tax morale in Latin America. Public Choice, 122(1-2), 133–157. doi:10.1007/s11127-005-5790-4

Turner, J. C., Hogg, M. A., Oakes, P. J., Reicher, S. D., & Wetherell, M. S. (1987). Rediscovering the social group: A self-categorization theory. Basil Blackwell. Retrieved from http://psycnet.apa.org/psycinfo/1987-98657-000

Vogel, J. (1974). Taxation and public opinion in Sweden: An interpretation of recent survey data. National Tax Journal, 27(4), 499–513.

Webley, P. (1991). Tax Evasion: An Experimental Approach. Cambridge University Press.

Weigel, R. H., Hessing, D. J., & Elffers, H. (1987). Tax evasion research: A critical appraisal and theoretical model. Journal of Economic Psychology, 8(2), 215–235. doi:10.1016/0167-4870(87)90021-3

Wenzel, M. (2004a). An analysis of norm processes in tax compliance. Journal of Economic Psychology, 25(2), 213–228. doi:10.1016/S0167-4870(02)00168-X

Wenzel, M. (2004b). Misperceptions of social norms about tax compliance (2): A field experiment. Retrieved from https://digitalcollections.anu.edu.au/handle/1885/41626

Wenzel, M. (2004c). The Social Side of Sanctions: Personal and Social Norms as Moderators of Deterrence. Law and Human Behavior, 28(5), 547–567. doi:10.1023/B:LAHU.0000046433.57588.71

Wenzel, M. (2007). The Multiplicity of Taxpayer Identities and Their Implications for Tax Ethics. Law & Policy, 29(1), 31–50. doi:10.1111/j.1467-9930.2007.00244.x

Yu, J. (1998). Virtue: Confucius and Aristotle. Philosophy East and West, 48(2), 323–347. doi:10.2307/1399830

Zahid, I. (2012). Compliance Perceptions Survey - Small and Medium Sized Enterprises and Individuals 2011. HM Revenue and Customs. Retrieved from http://www.hmrc.gov.uk/research/report195.pdf

Volume 1.1 of JOTA - Onu and Oats Cover

Downloads

Published

13-04-2015

How to Cite

Onu, D., & Oats, L. (2015). The Role of Social Norms in Tax Compliance: Theoretical Overview and Practical Implications. Journal of Tax Administration, 1(1), 113–137. Retrieved from https://journals.docuracy.co.uk/jota/article/view/157