Implications of tax audit risk, consequences, aggressive behavior and ethics for compliance

What is it about?

This study examines whether consideration of future consequences (CFC), Machiavellianism (MACH), and perceived role of ethics and social responsibility (PRESOR) increase understanding of the impact of tax audit risk on compliance. A between-subjects experiment is conducted to test the hypotheses. A hypothetical tax audit case (or lack thereof) is employed to create a high (low) perceived tax audit risk. The usable responses of 144 participants representing the general taxpayer population (obtained from Amazon Mechanical Turk) are analyzed. The results suggest that taxpayers with lower CFC, MACH or PRESOR scores are more compliant when tax audit risk is high than low. In contrast, taxpayers with higher CFC, MACH or PRESOR scores are indifferent toward a high or low tax audit risk. Future research can enhance understanding of these issues.

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