We thank Christine Bock, Anne Bruns, Felix Deichmann, Kristina Dick, Mascha Diebowski, Valerie Franke, Sebastian Fürstenberger, Beatrice Harbich, Pia Marliany, Samuel Müller, Lorenz Pfau, Ronald Pitlik, Max Sperger, and Elisabeth Taubinger for their assistance with data collection, and Sharynne Hamilton for her help with editing. This research was financed by a grant (no. P24863-G16) from the Austrian Science Fund (FWF).
Enhancing Tax Compliance through Coercive and Legitimate Power of Tax Authorities by Concurrently Diminishing or Facilitating Trust in Tax Authorities
Article first published online: 29 APR 2014
© 2014 The Authors. Law & Policy published by University of Denver/Colorado Seminary and Wiley Periodicals, Inc.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Law & Policy
Volume 36, Issue 3, pages 290–313, July 2014
How to Cite
Hofmann, E., Gangl, K., Kirchler, E. and Stark, J. (2014), Enhancing Tax Compliance through Coercive and Legitimate Power of Tax Authorities by Concurrently Diminishing or Facilitating Trust in Tax Authorities. Law & Policy, 36: 290–313. doi: 10.1111/lapo.12021
- Issue published online: 19 JUN 2014
- Article first published online: 29 APR 2014
- Austrian Science Fund (FWF). Grant Number: P24863-G16
Both coercion, such as strict auditing and the use of fines, and legitimate procedures, such as assistance by tax authorities, are often discussed as means of enhancing tax compliance. However, the psychological mechanisms that determine the effectiveness of each strategy are not clear. Although highly relevant, there is rare empirical literature examining the effects of both strategies applied in combination. It is assumed that coercion decreases implicit trust in tax authorities, leading to the perception of a hostile antagonistic tax climate and enforced tax compliance. Conversely, it is suggested that legitimate power increases reason-based trust in the tax authorities, leading to the perception of a service climate and eventually to voluntary cooperation. The combination of both strategies is assumed to cause greater levels of intended compliance than each strategy alone. We conducted two experimental studies with convenience samples of 261 taxpayers overall. The studies describe tax authorities as having low or high coercive power (e.g., imposing lenient or severe sanctions) and/or low or high legitimate power (e.g., having nontransparent or transparent procedures). Data analyses provide supportive evidence for the assumptions regarding the impact on intended tax compliance. Coercive power did not reduce implicit trust in tax authorities; however, it had an effect on reason-based trust, interaction climate, and intended tax compliance if applied solely. When wielded in combination with legitimate power, it had no effect.