Advancing Personal Income Tax Compliance

Posted: 11 Nov 2017

See all articles by Nicholas Hunt

Nicholas Hunt

University of Nevada, Reno

Govind Iyer

University of North Texas

Philip Reckers

Arizona State University (ASU) - School of Accountancy

Date Written: October 30, 2017

Abstract

In the United States, the Internal Revenue Service (IRS) estimates that over $450 billion in revenue is lost annually due to taxpayer noncompliance, the majority of which is related to the individual income tax. Using the standard deterrence theory (economic) model, in isolation, to explain and advance individual taxpayer compliance behavior has been found to exhibit weak validity. Accordingly increasing attention has focused on behavioral enhancements accruing from research in psychology. This paper examines the potentially countervailing deterrence theory and behavioral theory effects of various IRS communications to the public. We find that in one type of communication, namely publication of instances of detection and penalties levied related to egregious taxpayer evasion, deterrence theory factors (salience of detection and penalties) outweigh behavioral influences (advantageous comparison rationalizations). In a second type of communication, namely publication of the reciprocal individual taxpayer inflow and outflow calculus) rationalizations related to denial of victims and minimization of consequences dominate.

Keywords: Income Tax Compliance, Rationalization, Deterrence Theory, Experiment

Suggested Citation

Hunt, Nicholas and Iyer, Govind and Reckers, Philip, Advancing Personal Income Tax Compliance (October 30, 2017). Available at SSRN: https://ssrn.com/abstract=3067636

Nicholas Hunt (Contact Author)

University of Nevada, Reno ( email )

United States

Govind Iyer

University of North Texas ( email )

Denton, TX
United States

Philip Reckers

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

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