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The Social Norms of Tax Compliance: Evidence from Australia, Singapore, and the United States

Abstract

Tax compliance is a concern to governments around the world. Prior research (Alm, J. and I. Sanchez: 1995, KYKLOS 48, 3–19) has attributed unexplained inter-country differences in compliance rates to differences in social norms. Economics researchers studying tax compliance in the United States (U.S.) (see for example J. Andreoni et al.: 1998, Journal of Economic Literature 36, 818–860) have called for more attention to social (as opposed to economic) influences on tax compliance. In this study, we extend this prior research by explicitly examining the role of social norms [Cialdini, R. and M. Trost: 1998, The Handbook of Social Psychology (Oxford University Press, New York)] on tax compliance in three different countries. We test our research hypotheses using a hypothetical compliance scenario, which was administered in Australia, Singapore, and the U.S. There were differences in compliance rates and social norms among the three countries. Factor analysis of the social norm questions identified three distinct social norm constructs. Two of these factors were significant in explaining tax compliance behavior. The first and most influential factor was taxpayers’ own personal moral beliefs, along with the beliefs of those close to them (e.g., friends and important others). The second significant factor represented societal views of proper behavior. We conclude that social norms help to explain tax compliance intentions and why tax compliance rates are higher than would be predicted by strictly economic models.

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Acknowledgments

The authors appreciate the data collection assistance of Eunice Hooi, in Singapore, as well as helpful comments regarding the manuscript from Charles Kelliher and three anonymous reviewers.

Author information

Correspondence to Donna D. Bobek.

Additional information

Donna D. Bobek is an Associate Professor in the Kenneth G. Dixon School of Accounting at the University of Central Florida. Her research focuses on taxpayer and tax professional judgment and decision-making, with an emphasis on ethical decision-making. Donna has published in a number of academic journals including Accounting, Organizations & Society, Behavioral Research in Accounting, the Journal of the American Taxation Association, Advances in Taxation and Advances in Behavioral Accounting Research.

John T. Sweeney is the Ted Saldin Distinguished Professor of Accounting and the Chair of the Department of Accounting at Washington State University. His research interests include accounting ethics and organizational justice. He has published in a number of accounting research journals, including Accounting, Organizations, & Society, The Accounting Review, Behavioral Research in Accounting, the Journal of Accounting & Public Policy, the Journal of Business Ethics, and Research on Accounting Ethics.

Robin W. Roberts is the Al and Nancy Burnett Eminent Scholar and Director of the Kenneth G. Dixon School of Accounting at the University of Central Florida. His recent research focuses on ethics and regulation in the accounting profession and on corporate social responsibility. Robin has published in a number of academic journals including Accounting and the Public Interest, Accounting, Organizations & Society, Advances in Accounting, Auditing: A Journal of Practice & Theory, Critical Perspectives on Accounting, Journal of Accounting and Public Policy, Journal of Accounting Research, Journal of Business Ethics, Public Budgeting, Accounting & Financial Management, and Research in Governmental and Nonprofit Accounting.

Appendix

Appendix

Australian and United States scenario

The Browns have an automobile that they use for business and personal reasons. The tax laws provide that automobile expenses are deductible to the extent the automobile is used for business. In preparing their tax return, the Browns calculate that the automobile was used 50% for business. However, the Browns know that if they falsely claimed it was used 80% for business, their deduction would increase by $1,400.

Singaporean scenario

Mr. Tan, a self-employed individual, has incurred overseas traveling expenses which include both business and private traveling. The tax laws provide that traveling expenses are deductible against the business’ profits to the extent they are incurred for business reasons. In preparing his tax return, Mr. Tan has calculated that 50% of traveling expenses were incurred for business purposes. However, Mr. Tan knows that if he falsely claimed that 80% of the traveling expenses were incurred for business reasons, the deduction would increase by $1,400.

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

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Keywords

  • social norms
  • tax compliance