Legislating Morality: The Effects Of Tax Law Complexity On Taxpayers Attitudes

Abstract

This paper addresses the effects of tax law complexity on the behavior of taxpayers. A particular focus is the effect of tax law complexity on taxpayers perceptions of the morality of taking deductions that might be disallowed. The topic of taxpayer morality is addressed in terms of the broader concept of deterrence theory, which suggests that deterrence factors include formal punishment, informal social punishment and the guilt that would be felt if a behavior were perceived to be immoral. Tax law complexity may give rise to the perception that taking a questionable deduction would be socially acceptable tax avoidance rather than socially unacceptable tax evasion, and that taking a questionable deduction is morally acceptable. It is hypothesized that greater tax law complexity is associated with less perception that taking questionable deductions is immoral, and that less perception that taking questionable deductions is immoral is associated with greater inclination to take questionable deductions. Accordingly, it is hypothesized that greater tax law complexity is associated with greater inclination to take questionable deductions. The study entailed an experimental survey in which subjects evaluated hypothetical scenarios in which the opportunity existed to save taxes by taking a deduction that might be disallowed. ANOVA and Regression results were consistent with the hypotheses.