Social Behaviors, Enforcement, and Tax Compliance Dynamics

Posted: 19 Oct 2002

See all articles by Jon S. Davis

Jon S. Davis

University of Illinois at Urbana-Champaign - Department of Accountancy

Gary Hecht

University of Illinois at Urbana-Champaign

Jon D. Perkins

University of Illinois at Urbana-Champaign; Florida State University - Department of Accounting

Abstract

We analyze the effect of social norms and enforcement on the dynamics of taxpayer compliance. Specifically, we develop two models to evaluate the movement between classes of compliant and noncompliant taxpayers. Our analysis suggests that the effect on compliance of changing enforcement levels depends on whether the taxpayer population is initially compliant or noncompliant. Compliant populations are insensitive to changes in enforcement policies until enforcement becomes sufficiently lax, when we observe a sudden shift to high levels of noncompliance in equilibrium. In contrast, relatively noncompliant populations respond to increased enforcement by gradually increasing compliance. Then, when enforcement becomes sufficiently harsh, we find a sudden shift in equilibrium to very high levels of compliance. After the taxpayer population shifts from compliance to noncompliance or vice versa, our models predict that returning to the previous enforcement policy will not cause the population to return to its previous state.

Keywords: nonlinear dynamics, agent-based modeling, regulation, tax compliance

JEL Classification: H26, C61, C62, C63, M41

Suggested Citation

Davis, Jon S. and Hecht, Gary and Perkins, Jon Douglas, Social Behaviors, Enforcement, and Tax Compliance Dynamics. Available at SSRN: https://ssrn.com/abstract=327304

Jon S. Davis (Contact Author)

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
2173000489 (Phone)

HOME PAGE: http://aboutme.com/jondavis

Gary Hecht

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

Jon Douglas Perkins

University of Illinois at Urbana-Champaign ( email )

360 Wohlers Hall
1206 South Sixth Street
Champaign, IL 61820
United States

Florida State University - Department of Accounting ( email )

Rovetta Business Bldg. (RBA)
College of Business
Tallahassee, FL 32306-1110
United States

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