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Does legality matter?

  • Previous research argues that law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals’ decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects’ decisions by defining the borderline between legality and illegality. However, once we introduce potential negative financial consequences, legality does not affect tax minimization. Only if we use moral priming to increase subjects’ moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of law. Legality appears to be an important determinant of behavior only if we consider activities with no or low risk of negative financial consequences or if subjects are morally primed.

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Metadaten
Author:Kay Blaufus, Matthias Braune, Jochen Hundsdoerfer, Martin Jacob
URN:urn:nbn:de:hbz:992-opus4-6596
DOI:https://doi.org/10.2139/ssrn.2643636
Subtitle (English):the case of tax avoidance and evasion
Series (Serial Number):FAccT Center Working Paper Series (19/2015)
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Document Type:Working Paper
Language:English
Date of Publication (online):2018/06/10
Date of first Publication:2015/08/01
Release Date:2018/06/10
Tag:Experiment; Legalität; Moralischer Appell; Recht; Steuerhinterziehung; Steuervermeidung
Experiment; Law; Legality; Moral appeal; Tax avoidance; Tax evasion
Page Number:36
Institutes:WHU Finance & Accounting Group / Chair of Business Taxation
JEL-Classification:H Public Economics / H2 Taxation, Subsidies, and Revenue / H20 General
H Public Economics / H3 Fiscal Policies and Behavior of Economic Agents / H30 General
M Business Administration and Business Economics; Marketing; Accounting / M4 Accounting and Auditing / M41 Accounting
M Business Administration and Business Economics; Marketing; Accounting / M4 Accounting and Auditing / M48 Government Policy and Regulation
Z Other Special Topics / Z1 Cultural Economics; Economic Sociology; Economic Anthropology / Z19 Other
Licence (German):Copyright for this publication