اعتماد و قدرت به عنوان عوامل تعیین کننده ی انطباق های مالیاتی : آزمایش فرضیات چارچوب شیب لغزنده در اتریش، مجارستان، رومانی و روسیه

The slippery slope framework of tax compliance integrates different determinants of tax compliance and assigns them to one of two major dimensions. Accordingly, tax compliance depends on the factors perceived trust in the authorities and perceived power of the authorities, but trust on the one hand fosters voluntary compliance whereas power on the other hand leads to enforced compliance. The present study tested these main assumptions of the slippery slope framework in four European countries differing in terms of cultural and economic settings (Austria, Hungary, Romania and Russia) by presenting participants with different scenarios of trust and power. As predicted, the highest level of intended tax compliance and the lowest level of tax evasion were found in conditions of high trust and high power. In addition, participants in conditions of high trust indicate more voluntary compliance just as participants in conditions of high power indicate higher enforced compliance. The present results support the assumptions of the slippery slope framework and confirm the role of trust and power as important determinants of tax compliance.

Taxation, tax evasion, and the fighting of tax havens can be found on top of political agendas throughout the world. Political campaigns often focus on eliminating loopholes in national tax laws and negotiating bilateral tax agreements. In dealing with tax compliance, this approach might be regarded as deficit oriented, since tax revenues are not increased by improving compliance, but by making tax evasion more difficult. Early studies in the field clearly suggest that economic factors like detection probability and severity of penalties are the most prominent determinants of tax compliance (e.g., Allingham & Sandmo, 1972). However, a number of literature reviews report inconsistent findings on the relationship between audit probability, fines, and tax compliance (Andreoni et al., 1998 and Fischer et al., 1992) and if these factors were the only determinants of tax compliance, tax evasion rates should be way higher than actually observed (Alm, 1991). Thus, in recent years trust in governmental authorities, as well as tax morale and motivational postures have been investigated with regard to their influence on tax evasion (e.g., Braithwaite, 2003, Coleman, 1996, Lago-Peñas and Lago-Peñas, 2010, Lavoie, 2009 and Torgler, 2005). 1.1. Tax evasion, intended tax compliance, and tax morale The term tax evasion refers to the deliberate act of breaking the law in order to reduce taxes (Elffers et al., 1987, Sandmo, 2003 and Webley, 2004). It involves acts of omission (e.g., failing to report certain revenues) or commission (e.g., false reporting of personal expenses as business expenses) and is liable to prosecution and fines (Kirchler, 2007). Studies show that trust is negatively related to tax evasion, i.e., low trust in tax authorities is correlated with high levels of tax evasion (Richardson, 2008). Furthermore, a significant influence of power under the form of audits and fines on tax evasion is found in many studies (e.g., Allingham and Sandmo, 1972, Andreoni et al., 1998 and Fischer et al., 1992). Intended tax compliance assesses citizens’ disposition to pay taxes at a deliberate level. The literature on the effects of trust on intended tax compliance contains several studies which support the idea that trust in authorities positively influences it (e.g., Scholz and Lubell, 1998 and Torgler, 2003). More specifically, Feld and Frey (2007) show the importance of the relationship between taxpayers and tax authorities, emphasizing that mutual respect increases tax compliance level. Hammar, Jagers, and Nordblom (2009) note that tax compliance is fostered by the trustworthiness of policymakers. Focusing on the role of social variables in tax compliance, van Dijke and Verboon (2010) observe a link between trust and tax compliance, through procedural fairness. Low trust in tax authorities determines taxpayers to pay particular attention to the fairness with which authorities enact procedures. Thus, tax compliance increases only in a climate of high trust in which authorities act fair towards taxpayers. Power of authorities impacts differently on intended tax compliance, i.e., it has positive, negative, or no effect (for an overview see Kirchler, Muehlbacher, Kastlunger, & Wahl, 2010). The term tax morale is defined as “the attitude of a group or the whole population of taxpayers regarding the question of accomplishment or neglect of their tax duties; it is anchored in citizens’ tax mentality and in their consciousness to be citizens, which is the base of their inner acceptance of tax duties and acknowledgment of the sovereignty of the state” (Schmoelders, 1960, p. 97). Some researchers define tax morale as the intrinsic motivation to pay taxes (Alm and Torgler, 2006 and Feld and Frey, 2002) or “internalized obligation to pay tax” (Braithwaite & Ahmed, 2005), while others link it with “civic duty” (Orviska & Hudson, 2002) or tax ethics (Torgler & Murphy, 2004). Frey (2003) argues that taxpayers are endowed with a considerable amount of civic virtue and tax morale, which shapes their tax compliance behavior when integrated in the general context of the relationship between taxpayers and tax authorities. Various studies report that trust in the government and in governmental institutions positively influences tax morale (Fjeldstad, 2004, Pommerehne and Frey, 1992, Torgler, 2005 and Torgler and Schneider, 2004). Torgler (2003) analyzes compliance behavior in transition countries and concludes that trust in the legal system and the government increases tax morale. Frey (2003) argues that tax morale decreases when taxpayers have little trust in authorities and are treated with no respect. Power of authorities is also said to have an impact on tax morale. According to Frey (1992), power expressed through tight monitoring and severe punishment of non-compliant taxpayers crowds out tax morale, thus leading to even higher levels of non-compliance. 1.2. Cross-cultural research on tax compliance and tax morale The necessity of cross-cultural studies for understanding differences in tax behavior is emphasized by several authors. Hyun (2005) investigated the differences in compliance between South Korea and Japan and found out that tax culture is one fundamental determinant of these differences, with Japan having a higher level of tax culture and thus a higher level of compliance. Roth, Scholz, and Dryden-Witte (1989) argued that different cultural contexts which influence one’s perception of events may drive one’s attitude towards tax evasion. Riahi-Belkaoiu (2004) studied the link between tax morale and tax evasion analyzing data from 30 countries and showed that tax evasion is negatively related to economic freedom and high moral norms. According to the robust findings of Richardson (2006) derived from a 45-country analysis, non-economic factors have the strongest influence on tax evasion, i.e., lower levels of complexity and higher levels of fairness and tax morale lead to a decreased level of tax evasion across countries. Alm and Torgler (2006) found a significant positive correlation between tax morale and trust (in the legal system and in the parliament), as well as a considerable negative correlation between tax morale and the size of shadow economy. Torgler and Schneider (2009) showed that in many countries tax morale and the high quality of societal institutions contribute to the reduction of the shadow economy. Cummings, Martinez-Vasquez, McKee, and Torgler (2009) concluded that cross-cultural differences in tax compliance are due to perceptions of tax administration and taxpayers’ assessment of government quality. 1.3. The slippery slope framework In the field of research on tax behavior, the slippery slope framework (Kirchler, Hoelzl, & Wahl, 2008) is an attempt to integrate economic and psychological determinants in order to explain tax compliance. Since, as pointed out before, purely economic factors such as audit rates and fines have shown inconsistent effects on tax payments, the idea that taxpayers try to evade taxes, whenever there is a chance, seems obsolete (e.g., Alm et al., 1995 and Kirchler et al., 2010). Therefore, the slippery slope framework introduces two main dimensions which both are said to influence tax compliance: (i) trust in authorities and (ii) power of authorities. In this context, trust is defined as the general opinion that the tax authorities are benevolent and work for the common good, whereas power of authorities refers to the perception of authorities’ capacity to detect and punish evasion (Kirchler et al., 2008). According to the framework, citizens’ tax compliance can be fostered either via boosting trust in authorities or by increasing the perception of power of authorities. However, the quality of compliance is different, depending on the basis of honest taxpaying. Increasing tax honesty via enhancing trust in the authorities leads to voluntary compliance, while raising power of authorities engenders enforced compliance. 1.4. Dynamic effects of trust and power One important accomplishment of the slippery slope framework is the fact that it also considers potential dynamic effects of trust on power and vice versa. Thus, a change in one parameter may also affect the other parameter (Kirchler, 2007 and Kirchler et al., 2008). Depending on the interaction climate between taxpayers and tax authorities, changes in one dimension might have different consequences on the other dimension. For instance, an increase in power may be perceived by honest taxpayers as a sign that the authorities distrust them and thus it may undermine their motivation to comply (e.g., Castelfranchi and Falcone, 2010, Frey, 1997 and Feld and Frey, 2007). On the other hand, honest taxpayers may interpret a boost in power as an attempt of the authorities to reduce tax evasion, thus it can raise taxpayers’ trust in authorities and their level of compliance (e.g., Gambetta, 2000 and Mulder et al., 2006). In the same vein, an increase in trust might lead to a different interpretation of power, either as coercive or legitimate, depending on whether the climate is perceived as coercive or legitimate (Turner, 2005). 1.5. Voluntary versus enforced compliance Voluntary compliance is linked to the motivational posture “commitment”, which describes taxpayers as feeling morally obliged to pay taxes and to act in the interest of their peers (Braithwaite, 2003). According to James and Alley (2002), voluntary compliance is achieved without enforcement. In line with the assumptions of the slippery slope framework, perceived trust was found to be a significant predictor of the disposition to cooperate voluntarily in several studies with real taxpayers (Muehlbacher et al., 2011 and Muehlbacher et al., 2012). In contrast, enforced compliance is connected to the motivational posture “resistance” (Braithwaite, 2003). When people feel coerced, they may resist and refuse to comply as soon as they have the impression that monitoring is quite lax and they might not get caught (Kramer, 1999). As assumed by the slippery slope framework (Kirchler et al., 2008) power is a predictor of enforced compliance. This assumption is also supported by findings in the literature (Clark et al., 2004, Muehlbacher et al., 2011 and Wahl et al., 2010). 1.6. Aim of the present study The aim of this study is to confirm the general validity of the main assumptions of the slippery slope framework within different cultural and economic settings. Up to now, these assumptions have not been checked in an intercultural context by experimentally manipulating trust and power. The countries selected for this study are Austria, Hungary, Romania, and Russia, because they differ with regard to the fiscal system, the estimated levels of shadow economy, and the extent of corruption. While for both entrepreneurs and ordinary citizens, Austria has progressive tax rates, Romania and Russia have flat tax rates (16% and 13% respectively), in Hungary all citizens have to pay personal income tax according to a flat tax rate, and in addition to that, entrepreneurs can opt between a progressive and a flat tax rate regarding their entrepreneurial taxes. Moreover, among these four countries, Russia has the lowest tax burden (31%) and Romania has the highest number of tax payments per year (113) (World Bank Group, 2010). According to Schneider, Buehn, and Montenegro (2010), Austria has the smallest shadow economy measured in percentage of GDP (9.8%), followed by Hungary (24.4%), Romania (32.6%), and Russia (43.8%). Moreover, the Transparency International Corruption Perceptions Index (2011) ranging from 0 (highly corrupt) to 10 (very clean) lists Austria 16th with a score of 7.8, Hungary 54th with a score of 4.6, Romania 75th with a score of 3.6, and Russia 143rd out of 183 countries with a score of 2.4. Whereas the corruption index can be considered as an indicator for trust in the respective countries, the variable “Rule of Law” of the World Wide Governance Indicators (Kaufmann, Kraay, & Mastruzzi, 2010) could be interpreted as a proxy for (at least some aspects of) power of the state, since it measures in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence. A percentile rank from 0 (lowest possible value) to 100 (highest possible value) lists Austria with a score of 96.68, Hungary with 72.99, Romania scores 56.40 and Russia 26.07. All of the above rankings are clearly connected to institutional differences. Thus, Austria is an established democratic society and long-term member of the European Union, whereas Hungary and Romania are relatively young democracies and new members of the EU. Besides historical and geographical similarities, EU membership implies some form of political proximity of these countries, which is further reinforced by supranational spillovers on tax and fiscal policies coming from the authorities of the European Union. In contrast, Russia has less developed democratic institutions, but is also relatively free of external restrictions. Altogether, the following hypotheses will be tested in order to confirm the validity of the main assumptions of the slippery slope framework of tax compliance for all participating countries: (1) High perceived trust compared to low perceived trust in authorities leads to (a) a higher level of intended tax compliance, (b) a higher level of voluntary compliance, and (c) a lower level of tax evasion in the form of strategic taxpaying. (2) High perceived power compared to low perceived power of authorities results in (a) higher intended tax compliance, (b) higher enforced compliance, and (c) lower tax evasion in the form of strategic taxpaying. In addition, dynamic effects of trust on power and vice versa will be investigated, as well as potential differences between the participating countries. Participants in all countries should respond to the experimental manipulation quite similar, but we expect that the real situation in the respective countries, e.g., the extent of corruption, as well as differences with regard to general tax morale may interact with the experimental manipulation.

In an experiment testing the main assumptions of the slippery slope framework, we found the highest tax compliance and the lowest level of tax evasion in the condition of high trust in authorities and high power of authorities, just as expected. In addition, higher voluntary compliance was observed in the conditions of high trust, whereas higher enforced compliance was indicated in the conditions of high power. In contrast, participants in the group of low trust and low power showed the lowest intention to comply and the highest intention to evade taxes. This pattern of results is in line with the central notions of the slippery slope framework, which have been empirically tested before (Muehlbacher et al., 2011 and Wahl et al., 2010), but not in an intercultural setting manipulating trust and power experimentally. In comparison to the data from Wahl et al. (2010), who also used similar scenarios to induce different levels of trust and power, one interesting difference can be noticed. They found the highest level of tax evasion in the condition of low trust and high power, speculating that taxpayers might exploit loopholes in the system especially when the authorities act untrustworthy and exert much power. In the present data we did not find any confirmation of this phenomenon, as strategic taxpaying is highest in the group of low trust and low power. This may be due to differences concerning the samples, since the subjects in Wahl et al. (2010) were self-employed taxpayers, while our sample consisted of students in Economics and Business Administration. Students usually are not so experienced with paying taxes and this situation might affect especially the evaluation of the concrete scenarios to evade taxes by strategic taxpaying. Students tend to evaluate these scenarios consistent with their answers to the items measuring intended compliance, whereas self-employed taxpayers have real life experience with situations like those described in the scenarios, and therefore their answers should show more variance in general and furthermore be different compared to the evaluations of the students. With regard to potential dynamic effects of trust and power, we found some interesting results in analyzing the trust and power scales used to check whether the manipulations have worked. Participants in the high power conditions reported higher perceptions of trust, and participants in the high trust conditions indicated higher perceptions of power. These results support the idea that a change in one of these parameters can influence the other one (Kirchler, 2007 and Kirchler et al., 2008). Moreover, they are completely in line with Fischer and Schneider (2009), who analyzed data of more than 80.000 people in 83 countries and discovered that trust in the state and power of the state aggravate each other’s influence on tax compliance, and Lisi (2012), who observed a “slippery slope situation”, i.e., the negative effect of a decrease in trust on power, when evaluating data from the World Values Survey, the World Bank, and the International Monetary Fund. Additionally, notable differences concerning the participating countries can be found in the analyses. For instance, the Russian participants showed a lower level of voluntary compliance than the other participants, which could be due to a lower level of trust in their authorities. This finding is supported by the fact that Russia is listed worse than Austria, Hungary, and Romania on the Transparency International (2011). One counterintuitive finding is that the Austrian participants displayed a significantly higher feeling of being enforced to pay taxes than the others and they showed the same levels of voluntary compliance in all four conditions. In our view, the fact that Austrian participants might have a different notion of feeling enforced to pay taxes compared to the other participants is a possible explanation of this finding. They may not only feel enforced to pay because of the powerful authorities, but also because of their responsibility towards the other members of society, like one could expect in a synergistic climate between taxpayers and authorities. Accordingly, most of the items on voluntary compliance do also address the other citizens and common goods, e.g., “When I pay my taxes in Varosia as required by the regulations, I do so to support the state and other citizens”. Thus, a higher perceived responsibility for other citizens and society may be the reason for the unexpected finding of a constant and rather high level of voluntary compliance among Austrian participants. These assumptions are supported by the analysis of perceived similarity between different scenarios and home countries. Whereas Austrian participants did not identify one of the scenarios as particularly representative for the situation in Austria, participants from Hungary, Romania, and Russia indicated high similarity in low trust scenarios. Thus, Austrian subjects perceived the tax climate in their home country as more synergistic than the other subjects. This could also explain the general higher feeling of being enforced to contribute indicated by Austrian participants and the fact that they might feel a higher responsibility for society and other taxpayers. Additional evidence for this assumption can be found in the measures of general tax morale. Austrian and Hungarian participants indicated a significantly higher level of tax morale than the participants from Romania and Russia. Furthermore, like in many studies on tax compliance behavior as well as tax morale in general (e.g., Baldry, 1987, Lewis, 1982 and Webley et al., 1991) we observed a significant effect of gender throughout the analyses, with women being more compliant and showing higher tax morale. Although generally age is shown to influence tax compliance (Kirchler, 2007), we found no effects of age, but this is straightforward considering our homogenous samples of students aged between 17 and 25 years. The study is subject to some limitations. First, all respondents were students with little or no experience in paying taxes. This could explain for instance the different hierarchy of the four countries in terms of tax evasion as compared to official rankings. Second, the study measures tax compliance behavior at an intentional level. Third, even though the slippery slope framework incorporates the maximum and the minimum stances of trust and power, in our study these stances were not attained. All in all, the present results support the assumptions of the slippery slope framework and show that both trust and power are important determinants of tax compliance in different economic conditions and tax climates. Moreover, they suggest that governments should try to gain their citizens’ trust by enhancing fair procedures and service-oriented behavior. As a consequence, citizens could comply voluntarily even in cases where detection by authorities is rather unlikely.