Erling Barth (), Alexander W. Cappelen () and Tone Ognedal ()
Erling Barth: Institute for Social Research, Postal: Institute for Social Research , Oslo, Norway
Alexander W. Cappelen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Tone Ognedal: Universitetet i Oslo, Økonomisk institutt, Postal: Universitetet i Oslo, Økonomisk Institutt, Postboks 1095, 0317 Oslo, Norway
Abstract: In this paper we analyse how fairness considerations, in particular considerations of just income distribution, affect whether or not people find tax evasion justifiable and their willingness to evade taxes. Using data from the Norwegian “Hidden Labour Market Survey” we show that individuals with low hourly wages and long working hours have a higher probability of justifying tax evasion. These are individuals that arguably are treated unfairly in a tax system that taxes an individual’s total income without taking into account how many hours the individual has worked. The same individuals are also more willing and likely to take home income without reporting it to the tax authorities. The results are consistent with a model in which individuals make a trade-off between economic gains and fairness considerations when they make decisions about tax evasion. Taken together our results suggest that considerations of fair income distribution are important for the analysis of tax evasion.
20 pages, April 30, 2013
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