How can we explain the growing global problem of tax evasion and tax avoidance? Economic debates often explain these phenomena through models that highlight institutional aspects, such as incentive failures, weak enforcement, or poor legislation that leaves legal loopholes, which are then used to reduce the tax burden.
However, if noncompliance was only an institutional problem, all people would respond equally to incentives and enforcement (i.e., appropriate incentives and greater penalties would make us rationally choose to pay taxes). This would also mean that all people have the same motivations: we all want to evade, unless we are controlled and sanctioned.
Some strands of psychological and behavioral economics literature warn that these assumptions cannot be taken for granted. More enforcement and greater sanctions will not necessarily reduce evasion and avoidance, and such changes could increase them, as people may feel distrusted and persecuted. Additionally, not everyone has the motivation for noncompliance; in many cases, there is an intrinsic motivation to pay because of civic disposition or because it will help others. Although this allows us to understand the relevance of actors, we lack information on the subjective aspects behind the decision to evade and avoid, as not everyone is motivated similarly.
In a recently published paper, I delved deeper into the perceptions and beliefs of economic elite members regarding tax noncompliance. Focusing on the wealthy is important because their economic positions give them the most options for aggressive tax planning, making it possible to hire lawyers and accountants for designing sophisticated tax schemes to reduce their tax burdens. I used a cultural sociology approach, arguing that there are different motivations due not only to psychological factors but also to interactions with political culture, the state’s image, and other dominant ideas and values in each country. Thus, examining evasion and avoidance subjectivities shed light on beliefs about taxation, trust in the state, and the role of redistribution to tackle inequality, among others.
My research, based on in-depth interviews with members of the economic elite, was conducted in Chile, a country with high and long-lasting economic inequality and positive self-perception toward paying taxes based on a widespread vat payment and a legalistic culture.
The results show four main logics of action that shape tax noncompliance justifications. First, civic–ontological logic refers to formative or cultural weakness due to educational or ethical differences or to individualism. Second, regulatory logic stresses institutional fragilities, where individuals may have little evaluative margin, and therefore, tax planning represents a rational option to endure ferocious competition or to take business risks. Simply, the system is to blame, or at least, standing incentives provoke such behaviors. Third, testimony and subjectivity are perceived more clearly in countervailing logic than in previous rationalities. Here, responsibilities are addressed, such as the malfunctioning of a public apparatus while wasting resources or legislation that inadequately considers the interests of some interviewees. Finally, an affirmative logic is the only rationality that positively justifies noncompliance because it indicates the system is working according to its original aims. Rather than being an anomaly, tax planning is productive for the country, as untaxed money ultimately results in growth and wealth.
These findings suggest that different motivations and dispositions for noncompliance exist among the economic elite, which should lead policy makers to design different enforcement strategies. In addition, the results show a weakened image of the state where taxes represent a negative cost rather than a contribution to promote redistribution and inequality reduction. Lastly, it suggests that a legalistic culture can be part of the problem and not the solution, as paying taxes implies complying with the spirit of the law, that is, its purpose, and not just the letter of the law. Considering the increasing economic concentration in the top incomes from a global perspective, this approach also helps to understand better the moralities of the wealthy regarding taxation and the confrontation of inequality.
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