Published In

Journal of Business Ethics

Document Type

Article

Publication Date

10-24-2024

Subjects

Tax compliance, Tax systems

Abstract

This study investigates how the presence, and subsequent repeal, of a tax incentive for a prosocial behavior influences fairness perceptions and tax compliance for those who are and are not eligible for the incentive. Results of a multi-round experiment with 309 U.S. taxpayers show that individuals who engage in the prosocial behavior of making a charitable donation do not exhibit moral licensing behavior. Instead, those who give, versus do not give, engage in higher levels of tax compliance. In fact, we even observe consistency for those with the most motivation to morally license—those who donate to charity but also perceive the tax system as unfair. In addition, tax system fairness perceptions only influence the compliance decisions of individuals who do not engage in the prosocial incentivized behavior. Finally, we also show that a tax incentive for charitable giving is effective. Those who are eligible for a charitable-giving related tax incentive are more likely to give to charity than individuals who are ineligible for such an incentive; additionally, these incentivized activities decrease by one-third when the incentive is repealed. The study results add to the literature on moral licensing, charitable giving, and tax fairness and have several policy implications. We confirm that tax incentives are, on the margin, effective at encouraging prosocial behavior and that perceiving the tax system as unfair can reduce the tax compliance for some individuals. In particular, our results suggest that focusing scarce audit resources on non-donators may be an efficient way to detect non-compliance.

Rights

Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.

DOI

10.1007/s10551-024-05784-y

Persistent Identifier

https://archives.pdx.edu/ds/psu/42692

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