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Rationality Versus Emotions: The Case of Tax Ethics and Compliance

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Abstract

Businesses that rely heavily on cash transactions have been found to be particularly susceptible to low tax ethics. Recent research indicates that cash is a highly powerful and tempting reward, which elicits a strong emotional response. In this article, we investigate how emotions affect tax ethics in a series of experimental studies. Specifically, we show that affective priming and the ease with which tax information is retrieved moderate tax ethics. We also show that the relative effectiveness of deterrence, such as audit probabilities and tax fines, is moderated by affect. These results point toward a complex picture of tax ethics, requiring a multifaceted policy approach that emphasizes not only enforcement, but also cognitive and affective aspects of human behavior.

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Notes

  1. Details are available from the authors upon request.

  2. In a pre-test, we noted that the first question tended to be associated with neutral or negative responses, whereas the second question resulted mainly in neutral or positive responses. In the study, we have therefore counter-balanced the order of these two priming questions. Our results, however, do not show any differences regarding the order, so we pooled the data for our analysis.

  3. For affective priming, we used an Austrian politician (H. C. Strache) instead of George W. Bush. Strache is well known in Austria and polarizes voters. At the time of the data collection, he ranked second to last in the national confidence index of politicians with a value of minus 48 points (OGM 2010).

  4. Indeed, Studies 1 and 2, based on the responses of UK adults, show qualitatively similar results to earlier pilot studies, conducted with students.

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Authors and Affiliations

  1. Imperial College Business School, Imperial College London, South Kensington Campus, London, SW7 2AZ, UK

    Boris Maciejovsky

  2. Faculty of Psychology, University of Vienna, Universitätsstrasse 7, 1010, Vienna, Austria

    Herbert Schwarzenberger & Erich Kirchler

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  1. Boris Maciejovsky
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  2. Herbert Schwarzenberger
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  3. Erich Kirchler
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Correspondence to Boris Maciejovsky.

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Maciejovsky, B., Schwarzenberger, H. & Kirchler, E. Rationality Versus Emotions: The Case of Tax Ethics and Compliance. J Bus Ethics 109, 339–350 (2012). https://doi.org/10.1007/s10551-011-1132-2

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