Deterrence and moral persuasion effects on corporate tax compliance: Findings from a randomized controlled trial

Barak Ariel*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

83 Scopus citations

Abstract

Previous studies on tax compliance have focused primarily on the tax-reporting behavior of individuals. This study reports results from a randomized field test of the effects of deterrence and moral persuasion on the tax-reporting behavior of 4,395 corporations in Israel. Two experimental groups received tax letters, one conveying a deterrent message and the other a moral persuasion message. Three types of measures are used to evaluate compliance based on the magnitude of the difference-in-differences of means in 1) gross sales values reported to the authority, 2) tax dollars paid to the authority, and 3) tax deductions. Overall, both deterrence and moral persuasion approaches do not produce statistically significant greater compliance compared with control conditions. These results do not support the ability of a policy of sending tax letters to increase substantively the reporting of true tax liability or tax payments by corporations. However, these results also show that moral persuasion can be counterproductive: Corporations in this experimental group show an increase rather than a decrease in tax deductions, which translates into loss of state revenues. The implications for theory, research, and tax policy are discussed.

Original languageAmerican English
Pages (from-to)27-69
Number of pages43
JournalCriminology
Volume50
Issue number1
DOIs
StatePublished - Feb 2012
Externally publishedYes

Keywords

  • Corporate tax compliance
  • Deterrence
  • Effect sizes
  • Experiment
  • Letters
  • Moral persuasion

Fingerprint

Dive into the research topics of 'Deterrence and moral persuasion effects on corporate tax compliance: Findings from a randomized controlled trial'. Together they form a unique fingerprint.

Cite this