Honesty in Personal Tax Reporting: Ethical Prompts, Individual Factors, and Tax Reform

• In Event: Human Factor in Financial Accounting and Tax Reporting

Abstract

Various forms of tax evasion are difficult to detect, leaving individuals with the choice of whether or not to comply with tax law. This study focuses on a whether an ethical prompt eliciting moral reasoning can reduce tax evasion. We also study a number of personal attitudes and characteristics, as these individual factors may drive or predict tax evasion intentions. We unexpectedly find that an ethical prompt does not impact an individual’s intent to engage in tax evasion. Of the variables studied, only commitment to the process of taxation, fear of being caught by the IRS, and level of psychopathy predict their intention to evade. These findings are consistent across two samples, taken both before and after the passage of the Tax Cuts and Jobs Act of 2017, implying that well-advertised tax reforms may not materially impact the relationship between taxpayers and the taxpaying process.

Authors

• Charles D Bailey, James Madison University

• James M. Plecnik, Loyola Marymount University