Erich Kirchler

University of Vienna | UniWien · Fakultät für Psychologie

Outstanding papers presented at the 7th International Conference "The Shadow Economy, Tax Behavior and Institutions", held online 23rd to 26th September 2021, hosted by Brunel University, London are assembled in this special issue together with related research on shadow economy, tax systems and tax compliance. We welcomed both theoretical and empi...

This study examines the effectiveness of tax compliance strategies on building trust in the tax administration. We applied a qualitative research approach by collecting data through in-depth interviews with 15 entrepreneurs of medium-sized enterprises, doing business in the Colombo district, Sri Lanka and five experts in the tax field. We collected...

The slippery slope framework (SSF) of tax compliance postulates that taxpayers’ compliance behaviour depends on the two dimensions: trust in authorities and power of authorities. In an attempt to overcome common-method biases, the present study tests the main assumptions of the SSF with a sample of 44 countries/regions. Country/region-level trust a...

In a scenario study with 1200 Austrian taxpayers, we examined how tax compliance is affected by the economic crisis related to the COVID-19 pandemic. Moreover, we investigated the potential of trust in government, attitude towards taxes, and justice perceptions in mitigating potential effects. The results suggest a strong effect of the economic env...

Laboratory experiments are frequently criticised, in part because of the sensitivity of the results to specific features of the design. This paper addresses an important question regarding the key aspect of the experimental environment: How should the dependent variable – participants’ choices – be operationalised? For the specific context of labor...

Even though Covid-19 cases were declining in most European countries since May 2020 and the necessary efforts to ensure a functioning healthcare system can be considered successful in many cases, the economic and thus social policy challenges are still ahead.

After the crisis persisted for a long time and lockdown measures had been imposed in many countries for months, the “initial magic” of solidarity faded.

The threat of an invisible “enemy” that approaches gradually from a distance and eventually envelops and paralyzes the whole world, causes fear, insecurity and a sense of loss of control. The impending loss of control leads to protective and defensive reactions that are not considered for a long time because the danger is immediate.

In times of extreme uncertainty, we yearn for explanation, truth and order. The likelihood that the desire for clarity will be fulfilled soon is unlikely because SARS-CoV-2 is complex, there is uncertainty about when and in what form Covid-19 manifests itself as a disease, and there is no consensus about how the health of the population can be sust...

Die aktuelle Energiekrise verlangt nach einer Änderung unseres täglichen Verhaltens, als Individuen und als Gesellschaft. Erkenntnisse aus der verhaltenswissenschaftlichen Forschung liefern Hinweise, wie Haushalte, öffentliche Institutionen und Unternehmen beim Senken des Energieverbrauchs und der Nutzung erneuerbarer Energiequellen unterstützt wer...

The highly influential Allingham and Sandmo model of income tax evasion assumes that taxpayers are driven by utility maximization, choosing evasion over compliance if it yields a higher expected profit. We test the main assumptions of this so-called deterrence approach considering both compliance decisions and the process of information acquisition...

The present study investigates the impact of incidental emotions on tax compliance behavior in an experimental setting. Different theories are divided about how experiencing incidental emotions should influence tax decisions and the few existing studies yield inconsistent results. Our aim was to investigate differences between three specific emotio...

In a two-stage lab experiment, we examine whether wage inequity has a greater impact on tax compliance and on the beliefs about peers’ compliance levels among the wronged when it results from intentional human choice versus a random mechanism. Subjects are organized into groups of six. In the first stage, we perform a wage inequity manipulation by...

Managing tax compliance during the pandemic and assuring compliance when COVID-19 is under control is challenging for governments. This qualitative and descriptive study explores the perceived effectiveness of current tax compliance strategies in Sri Lanka and derives considerations to improve them for the time after the pandemic. We conducted in-d...

Taxpayers experience different emotions in tax related situations such as collecting documents for filing, contacting the tax authorities to get advice, or experiencing an audit. We replicated a study conducted in Austria with a representative sample of self-employed taxpayers from Italy and discuss similarities and differences in the impact of emo...

The present study investigates the impact of incidental emotions on tax compliance behavior in an experimental setting. Different theories are divided about how experiencing incidental emotions should influence tax decisions and the few existing studies yield inconsistent results. Our aim was to investigate differences between three specific emotio...

In a two-stage, preregistered lab experiment (aspredcited.com #36099), weexamine whether wage inequity has a greater impact on tax compliance and onthe beliefs about prevailing compliance norms among the wronged when it results from intentional human choice versus a random mechanism. Subjects areorganized into groups of six. In the ?the first stage...

How can governments get individuals and firms to pay taxes, especially given increasing tax base erosion via tax evasion, tax avoidance, and money laundering? In this paper we discuss the many different perspectives to explain why people pay-and do not pay-their taxes, especially perspectives based on "responsive regulation," and we use then these...

This article employs unique tax administrative data and operational audit information, including risk scores used for audit selection, from a sample of approximately 7500 self-employed US taxpayers to investigate the effects of operational tax audits on future reporting behavior. Our estimates indicate that audits can have substantial deterrent or...

Die Bedrohung durch einen nicht sichtbaren „Feind“, der von weit weg sukzessiv näher rückt und schließlich die ganze Welt erfasst und lähmt, löst Angst, Unsicherheit und das Gefühl von Kontrollverlust aus. Drohender Kontrollverlust führt zu Schutz- und Verteidigungsreaktionen, die nicht lang überlegt werden, weil die Gefahr unmittelbar ist.

Auch wenn die Covid-19-Krankheitsfälle seit Mai 2020 in den meisten europäischen Ländern rückläufig sind und die notwendigen Anstrengungen zur Gewährleistung eines funktionierenden Gesundheitssystems in vielen Fällen als geglückt angesehen werden können, stehen die wirtschaftlichen und damit gesellschaftspolitischen Herausforderungen noch bevor.

Nachdem die Krise längere Zeit anhielt und in vielen Ländern monatelang Ausgangsbeschränkungen verhängt worden waren, verblasste der „Anfangszauber“ der Solidarisierung.

In Zeiten extremer Unsicherheit sehnen wir uns nach Erklärung, Wahrheit und Ordnung. Dass der Wunsch nach Klarheit bald in Erfüllung gehen wird, ist unwahrscheinlich, weil SARS-CoV-2 komplex ist, Unsicherheit darüber besteht, wann und in welcher Form sich Covid-19 als Erkrankung manifestiert und kein Konsens darüber besteht, wie die Gesundheit der...

Traditionally, research focuses on individual taxpayers that—when faced with a decision under uncertainty—are assumed to maximize their profits through rational decision processes. However, economic psychology and behavioral economics reveal several anomalies where the observed effects are opposite to the theoretical predictions. Moreover, psycholo...

The highly influential Allingham and Sandmo model of income tax evasion framed the decision whether to comply or to evade taxes as a decision under uncertainty, assuming that taxpayers are driven by utility-maximization. Accordingly, they should choose evasion over compliance if it yields a higher expected profit. We test the main assumptions of th...

In this study, we analyze the free verbal associations to the stimuli women quotas and men quotas of 327 medical students. Women and men quotas are characterized by the same modus operandi (i.e., preferential treatment based on sex/gender). However, women quotas help a low-status group, whereas men quotas help a high-status group. In line with a su...

To advise investors on the financial market according to their financial risk tolerance it is necessary to apply a valid and reliable instrument measuring financial risk tolerance. We develop a screening instrument which assesses different facets of financial risk tolerance, namely, risk propensity, risk attitude, risk capacity, and risk knowledge....

The motivation to comply or not to comply is considerably influenced by beliefs, attitudes, and social representations of taxpayers. These subjective conceptualizations and evaluations are often not objective or true, but they determine how citizens construct their subjective reality. Attitudes, judgments, and behavior intentions eventually shape p...

Als uns das Virus SARS-CoV-2 in Europa erreichte, gerieten wir in Panik. Das Leben wurde auf das Notwendigste heruntergefahren und zaghaft wieder gelockert. Dem Lockdown folgen gewaltige Veränderungen. Die Rückkehr in die bekannte Normalität ist nicht in Sicht. Wie erlebten wir die Bedrohung unserer Gesundheit und die Veränderungen der gewohnten Le...

The replicability of research findings has recently been disputed across multiple scientific disciplines. In constructive reaction, the research culture in psychology is facing fundamental changes, but investigations of research practices that led to these improvements have almost exclusively focused on academic researchers. By contrast, we investi...

Individual differences in mental accounting have rarely been studied, and empirical evidence regarding the relation between mental accounting and personality characteristics is scarce. The present paper reports three studies applying a Likert-type scale to assess the extent individuals engage in mental accounting practices. In each study, the five...

To a large extent, the body of research that looks at individuals’ compliance with the law focuses on the dichotomy between compliance as rule-following and noncompliance as rule-breaking. However, a fascinating case of noncompliance is that where individuals selectively follow existing rules in order to circumvent the legal principle, this behavio...

This paper employs unique tax administrative data and operational audit information from a sample of approximately 7,500 self-employed U.S. taxpayers to investigate the effects of operational tax audits on future reporting behavior. Our estimates indicate that audits can have substantial deterrent or counter-deterrent effects. Among those taxpayers...

Two studies, using both qualitative and quantitative methods, showed that tax decisions elicit different emotions, which have an impact on compliance. Study 1 used focus groups with self-employed (N = 7) and employed (N = 9) taxpayers as well as tax auditors (N = 8) to identify the emotions that are relevant in the taxation context and to single ou...

The slippery slope framework of tax compliance emphasizes the importance of trust in authorities as a substantial determinant of tax compliance alongside traditional enforcement tools like audits and fines. Using data from an experimental scenario study in 44 nations from five continents (N = 14,509), we find that trust in authorities and power of...

A constructive, highly professional relationship between tax authorities and taxpayers is essential for tax compliance. The aim of the present paper was to explore systematically the determinants of this relationship and related tax compliance behaviors based on the extended slippery slope framework. We used in-depth qualitative interviews with 33...

Elgar Research Agendas outline the future of research in a given area. Leading scholars are given the space to explore their subject in provocative ways, and map out the potential directions of travel. They are relevant but also visionary. Presenting state-of-the-art reviews on classical and novel research fields in economic psychology, this Resea...

Economic psychology studies the fundamentals of perception and understanding of economic phenomena, economic thought and behaviour. It is an interdisciplinary field of research, strongly overlapping with behavioural economics. Scholars in the field laid the foundations more than a century ago, studying work and organizational behaviour, consumer de...

In two experiments on hypothetical purchase decisions, Sussman and Olivola (2011) found that US citizens prefer avoiding tax-related costs over avoiding tax-unrelated monetary costs of the same size. The original Experiment 1 and 2 tests of this Tax Aversion indicated that people are willing to wait longer to receive a discount when it refers to ta...

Mental accounting describes a series of cognitive operations that help organize financial activities and facilitate money management. Self-employed taxpayers who make use of a separate mental account for future income tax payments or collected value added tax (VAT) might find it easier to declare their taxes correctly than taxpayers who do not. Thi...

We analyzed 1415 newspaper obituaries of female and male leaders published in Germany, Austria, and Switzerland from 1974 to 2016, covering a time-span of 42 years, to investigate change in descriptive and prescriptive gender stereotypes. The obituaries’ content was condensed to four categories: agency, competence, and communion were used to invest...

Stage 1: Sussman and Olivola (2011) reported that people in the US show a stronger preference to avoid tax-related costs than to avoid tax-unrelated monetary costs of the same size and coined the term Tax Aversion to describe the phenomenon. The original Experiment 1 and 2 results indicated that people are willing to incur increased timely costs to...

Focusing illusion describes how people, when making choices, give disproportionate attention and weight to attributes in which their options differ more. It can lead to harmful loan consumption because when considering a loan, one may attend excessively to the difference between getting the loaned amount and not, while ignoring the differences betw...

Although tax non-filing and the resulting tax evasion are a challenge to public welfare, particularly in developing countries, scholarly knowledge on taxable citizens who do not register as taxpayers, also known as the ‘ ghosts ‘, is minimal. To expand this knowledge base, this empirical chapter compares rich self-employed individuals identified as...

Focusing illusion describes how people, when making choices, give disproportionate attention and weight to attributes in which their options differ more. It can lead to harmful loan consumption because when considering a loan, one may attend excessively to the difference between getting the loaned amount and not, while ignoring the differences betw...

The implementation of Horizontal Monitoring (HM) in Austria represents a shift in the prevailing command-and-control paradigm towards enhanced cooperation between taxpayers and tax authorities. In the present paper, we assess how HM is perceived by different stakeholder groups when it was introduced as a pilot project embedded in the “Fair Play Ini...

We investigate the ethical behaviour of small business owners by focusing on individuals' motivations to comply with tax obligations. In a study of 330 small business owners, we assess the role of internalised motivation to pay taxes versus extrinsic motivation in driving tax compliance. First, we find that internalised and extrinsic motivation hav...

Taxation is one of the most fundamental and influential institutions in modern societies (Gaisbauer, Schweiger, and Sedmak, 2015). Taxes are an indispensable source of financing public services to secure social welfare, public order, and national defense. A range of public goods, such as education, health, or infrastructure, cannot be appropriately...

Private households dispose of a major part of a nation's financial resources. Consequently, financial decisions taken by households affect a nation's overall welfare. Regulators, marketers, consumer protectionists, businesses and economists are in need of knowledge about how households operate if they are to understand and shape household decisions...

To date, tax research has strongly focused on income tax compliance. Meanwhile, a large proportion of tax revenue is raised by consumption taxes, such as value added tax (VAT). This study compared the respective social representations of income tax and VAT by employed and self-employed taxpayers. The aim was to gain an understanding of similarities...

Cambridge Core - Economics: General Interest - Economic Psychology - by Erich Kirchler

Dear colleague, Thank you for your request. If you would like to download our papers, please use the following link: https://social-econ-psych.univie.ac.at/team/erich-kirchler/downloads/ Best regards, Erich Homepage: https://social-econ-psych.univie.ac.at/team/erich-kirchler/ Video on TAX PSYCHOLOGY – TRUST & POWER: https://www.youtube.com/w...

Purpose The purpose of this paper is to investigate the relationship of inheritance tax behavior with normative value principles and factors found relevant for income tax compliance. Also, it examines the influence of affectedness and earmarking on inheritance tax compliance. Furthermore, it compares two countries similar in tax morale, tax culture...

Using country-level data from 2003–2014, we examine the association between auditing level (measured as number of verification actions taken by tax authorities per 100 taxpayers in each country) and tax compliance (measured as business executives’ perception of tax evasion). Our hypothesis is that compliance increases until a certain auditing level...

This chapter introduces psychological perspectives on tax behaviour. It proposes that the interaction climate between taxpayers and tax authorities matters, and that the coordination of power and trust into a comprehensive approach to understanding and regulating tax behaviour is key. Economic psychology acknowledges that tax behaviour depends part...