Social Norm and Its Influence on Tax Compliance

The purpose of this paper is to study the role of social norms on tax compliance. Tax compliance has been a problem since taxes were invented and will remain a problem as long as taxes exist. Although a relatively high level of tax compliance has been achieved in some developed countries, tax evasion is still a serious problem in almost all countries, especially developing countries. Government authorities and policy makers have been trying to promote tax compliance by developing cost-effective policies. More recently, researchers have started to focus on non-economic factors affecting tax compliance, such as moral beliefs and social norms. Experimenting with social norms has proven immensely successful. In light of those experiments, economists have been trying to examine the influence of specific social norms (descriptive norms, injunctive norms, subjective norms and personal norms) on tax compliance over the past decade. The study presented here summarizes previous literature and addresses the role of social norms on tax compliance through a lab experiment with participants from a 300-level economic class at Trinity College (CT). The results show that all types of social norms can affect tax compliance and that descriptive norms have the most fundamental influence. Moreover, the study also shows that individuals’ perception on the audit rate also affects tax compliance