Details
| Original language | English |
|---|---|
| Pages (from-to) | 182-206 |
| Number of pages | 25 |
| Journal | Journal of Economic Behavior and Organization |
| Volume | 127 |
| Early online date | 26 Apr 2016 |
| Publication status | Published - Jul 2016 |
Abstract
Previous research argues that the law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals' decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects' decisions by defining the line between legality and illegality. However, once we introduce potential negative financial consequences, we observe no difference between legal and illegal tax minimization behavior. Only if we use moral priming to increase subjects' moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of the law. Legality might be an important determinant of behavior only if we consider activities with little or no risk of negative financial consequences or if subjects are morally primed.
Keywords
- Crowding out, Expressive law, Legality, Moral appeals, Tax avoidance, Tax evasion
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
- Business, Management and Accounting(all)
- Organizational Behavior and Human Resource Management
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In: Journal of Economic Behavior and Organization, Vol. 127, 07.2016, p. 182-206.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Does legality matter? The case of tax avoidance and evasion
AU - Blaufus, Kay
AU - Hundsdoerfer, Jochen
AU - Jacob, Martin
AU - Sünwoldt, Matthias
PY - 2016/7
Y1 - 2016/7
N2 - Previous research argues that the law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals' decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects' decisions by defining the line between legality and illegality. However, once we introduce potential negative financial consequences, we observe no difference between legal and illegal tax minimization behavior. Only if we use moral priming to increase subjects' moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of the law. Legality might be an important determinant of behavior only if we consider activities with little or no risk of negative financial consequences or if subjects are morally primed.
AB - Previous research argues that the law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals' decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects' decisions by defining the line between legality and illegality. However, once we introduce potential negative financial consequences, we observe no difference between legal and illegal tax minimization behavior. Only if we use moral priming to increase subjects' moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of the law. Legality might be an important determinant of behavior only if we consider activities with little or no risk of negative financial consequences or if subjects are morally primed.
KW - Crowding out
KW - Expressive law
KW - Legality
KW - Moral appeals
KW - Tax avoidance
KW - Tax evasion
UR - http://www.scopus.com/inward/record.url?scp=84969144838&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2016.04.002
DO - 10.1016/j.jebo.2016.04.002
M3 - Article
AN - SCOPUS:84969144838
VL - 127
SP - 182
EP - 206
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
ER -