How Government Spending Impacts Tax Compliance
Diana Falsetta, Jennifer K. Schafer, and George T. Tsakumis Coles Working Paper Series, FALL15-01, October 2015
This study examines how government spending affects tax compliance. Results of our study indicate that strong (weak) support for the government’s use of tax dollars results in increased (decreased) tax compliance. In addition, audit probability only influences compliance decisions when there is support for government programs; without taxpayer support, compliance is lower regardless of the audit probability. This highlights the importance of gaining taxpayer support for government programs, and suggests that attempts to align the goals of taxpayers with those of the government may increase voluntary compliance among taxpayers. We also examine the influence of ethics and self-interest on taxpayers’ compliance decisions. We find that for individuals who are motivated more by self-interest, a high audit rate, as well as support for a program may be necessary to improve compliance behavior. Overview
20 | Coles Working Paper
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