Tax Compliance: Ethical Orientation, Risk Perception and the Role of the Tax Preparer

• In Event: Tax, Loss, and Uncertainty

Abstract

This study examines the role of the tax preparer, as well as the effects of the taxpayer’s ethical orientation and perceived financial risk, on the taxpayer’s compliance decision. This research experimentally investigates the role of the tax preparer in situations where income is not reported to a third party and the tax law is clear, yet noncompliance still occurs. We find that individuals receiving a high enforcement message from the tax preparer are significantly more compliant than individuals receiving a low enforcement message. Additionally, we find a significant two-way interaction between taxpayer financial risk perception and ethical orientation, suggesting that when the taxpayer’s financial risk perception is low, tax compliance does not differ based on the level of an individual’s ethical reasoning. However, when the taxpayer perceives financial risk to be high, those with high ethical reasoning are significantly more compliant than those with low ethical reasoning.

Authors

• Ashley B Stewart, Delta State University

• Morris H Stocks, The University of Mississippi

• W. Mark Wilder, The University of Mississippi