Trust and Compliance Effects of Taxpayer Identity Theft: A Moderated Mediation Analysis.

• In Event: Behavioral Tax Research

Abstract

Tax identity theft is one of the most pressing concerns for the U.S. tax authority (the Internal Revenue Service), and is a growing problem for tax authorities worldwide. However, tax researchers have not considered how taxpayers react to tax authorities’ efforts to combat identity theft. Accordingly, we conduct an experiment, using adult U.S. taxpayers, in which we consider how IRS responsibility for preventing identity theft and IRS responsiveness following identity theft influence taxpayers’ trust in the tax authority, and subsequent tax compliance intentions. We find that IRS responsiveness influences trust, and trust in turn influences compliance. However, this effect is conditional upon levels of IRS responsibility. When the IRS is to blame for identity theft, more responsiveness by the IRS does not significantly influence compliance through trust. Conversely, when the IRS is not to blame for identity theft, more responsiveness by the IRS significantly influences compliance through trust. These findings suggest that when the IRS is to blame for identity theft, there may be little the IRS can do to increase taxpayers’ trust and subsequent compliance, which underscores the importance of preventing identity theft in the first place.

Authors

• Jonathan Farrar, Ryerson University

• Cass Hausserman, Portland State University

• Odette Pinto, MacEwan University