To Punish or Not to Punish? The Impact of Tax Fraud Punishment on Observers’ Tax Compliance

Jonathan Farrar, Tisha King

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)

Abstract

This article synthesizes insights from deterrence theory and social psychology literature on retributive justice to develop and test a theoretical model which predicts how and why observers’ tax compliance intentions are influenced by knowledge of the punitive outcomes faced by individuals found guilty of tax fraud. We test our model experimentally on a sample of Canadian taxpayers and manipulate perceived responsibility for a fraud and whether a fraud perpetrator is punished. We show that observers’ tax compliance increases when a fraud perpetrator is punished only when the perpetrator is perceived as blameworthy. The psychological process through which this positive influence operates is relatively complex, as it includes perceptions of punishment deservingness and affect. We also find that tax compliance decreases when a tax fraud perpetrator is unpunished, regardless of perceived blameworthiness. Our results are robust when we control for economic determinants known to influence fraud. The article concludes by discussing our findings’ implications for fraud research and policy.

Original languageEnglish
JournalJournal of Business Ethics
DOIs
Publication statusAccepted/In press - 2022

Bibliographical note

Publisher Copyright:
© 2022, The Author(s), under exclusive licence to Springer Nature B.V.

ASJC Scopus Subject Areas

  • Business and International Management
  • General Business,Management and Accounting
  • Arts and Humanities (miscellaneous)
  • Economics and Econometrics
  • Law

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