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May 11, 2006 · 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.
- Lars P. Feld, Lars P. Feld, Bruno S. Frey
- 2006
the contract and to evade taxes. The psychological tax contract has thus also elements of respect (or interactional justice). In section V, we draw some conclusions as to the policy implications of such a contractual view of tax compliance. It implies that simple policy proposals are inadequate to shape the psychological tax contract successfully.
Jan 8, 2007 · A psychological tax contract goes beyond the traditional deterrence model and explains tax morale as a complicated interaction between taxpayers and the government. As a contractual relationship implies duties and rights for each contract party, tax compliance is increased by sticking to the fiscal exchange paradigm between citizens and the state.
- Lars P. Feld, Bruno S. Frey
- 2007
A much more fundamental critique of the standard economic approach is provided by another line of research according to which tax morale serves as an explanation for compliance rates.1 Frey & Feld (2002) argue that tax compliance is driven by a psychological tax contract between citizens and tax authorities.
Frey & Feld (2002) argue that tax compliance is driven by a psychological tax contract be-tween citizens and tax authorities. For that contract to be upheld, incentives like rewards or punishment need to be provided, but loyalties and emotional ties that go well beyond transac-tional exchanges must be considered additionally.
In this paper, we develop the notion of a psychological tax contract by looking on the conditions that shape tax morale and confronting it with empirical evidence. Based on crowding theory, the asymmetric impact of negative (deterrence) and positive incentives (rewards) on tax morale is discussed.
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Lars P. Feld & Bruno S. Frey, 2006. "Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation," IEW - Working Papers 287, Institute for Empirical Research in Economics - University of Zurich.
