The Troika of Sociology, Political Science and Economics
Edited by Gert Tingaard Svendsen and Gunnar Lind Haase Svendsen
Chapter 14: Tax Compliance
1 Lars P. Feld 14.1 Introduction Tax compliance has gained considerable importance for tax policy during the last decade. The German case is particularly instructive in this respect as a policy of tax-cut-cum-base-broadening is accompanied by measures that supposedly reduce tax evasion and avoidance. The German government has hoped to increase tax compliance by fostering deterrence directly (for example, the Black Activities Act of 2004) or indirectly (through facilitated information exchange via the European Savings Directive in 2005), but also by a tax amnesty in 2003. The importance of compliance issues is, however, not only visible in Germany. In the USA discussion on fundamental tax reform, its potential to facilitate compliance is additionally debated (Gale and Holtzblatt, 2002; The President’s Advisory Panel on Federal Tax Reform, 2005: ch. 6). In the UK, the Mirrlees Review, aiming at a fundamental reform of the UK tax system for the twenty-ﬁrst century, includes a chapter on tax compliance as well (Slemrod et al., 2007). Such attention for tax compliance and administrative issues is a relatively new phenomenon as tax policy used to exclusively focus on eﬃciency and equity issues. The main focus in the literature on tax compliance, and thus of policies to enhance tax honesty, is on deterrence. When we let this dominance of deterrence prevail in the beginning of our analysis, some interesting insights can be gained. Deterrence (and coercion) by the state in democratic societies governed by the rule of law usually implies the use of sanctions, if...
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