Special session on Economics, Law and Psychology in Taxation: Perspectives and Critical Issues of Behavioural Taxation (BETA)

Scope

Effective and efficient tax collection is crucial for financing public services and their provision to citizens. For this reason, the collection is considered one of the most delicate phases of the complex process of collecting public revenue and has always enjoyed particular importance and attention by the tax legislator. Indeed, various measures have been introduced to improve the functionality of this phase of the public revenue collection process. Errors or delays in payments are, consequently, subject to administrative sanctions. The sanctions above are, in turn, a cause of tax disputes with the financial administrations, which are obviously interested in both the timely assessment and the recovery of the sums due.

Among the founders of modern economic thought, Adam Smith also considered this phase of acquiring public revenue fundamental. He highlighted its importance when, in 1776, he dedicated three of his four maxims on taxation to the relationship between the tax administrations and the taxpayer. In particular, he invoked - in addition to the fairness of the withdrawal - certainty regarding the times, methods and quantities of payments, the convenience of withdrawal and the efficiency of collection. He discovered that citizens are more willing to pay taxes rather than avoid their tax obligations when (1) there is a good relationship with the financial administration, (2) tax rates are moderate and fair, and (3) all revenues are used to pay for services delivered to taxpayers.

Various scholars subsequently collected Smith’s insights; thus, tax compliance has become one of the most intensely studied fields in economics. The most appreciated model was developed by Allingham and Sandmo (1972), drawing on the economic theories of crime (Becker, 1968) and of insurance choices when in conditions of uncertainty (Arrow, 1970). Indeed, it considers the taxpayer's possible choices when faced with tax obligation as a problem of maximising expected utility in conditions of uncertainty. Consequently, it must be based on particularly stringent assumptions, such as being perfectly rational and fully informing the taxpayer. Therefore, the limitations presented by this model are numerous, as it does not consider many variables which, in empirical reality, seem to impact the taxpayer’s decision profoundly.

For these reasons, while maintaining the rational framework of expected utility on which it is based, the aforementioned Allingham and Sandmo model has been extended through the introduction of more realistic assumptions (Yitzhaki, 1974) and the development of a dynamic version (Engel and Hines, 1999). Subsequent studies have then led to the development of Tax Compliance models that incorporate elements of Cumulative Prospect Theory (Dhami and Nowaihi, 2007) and the “social effects” linked to the influence that specific social and cultural contexts can have on the decisions of the taxpayer (Hashmizade et al., 2012). Thus, a new flourishing strand of scientific literature on taxation was born, which, to study better the taxpayer’s decision-making, claims to want to combine economic, cultural, sociological and psychological factors together. This trend has so far provided precious new insights into taxpayers' behaviour and the relationships between the latter and the financial administration.

However, there is still a long way to go. Exciting challenges and valuable opportunities loom on the horizon (Torgler, 2021). Accurate behavioural investigations can only be carried out if longitudinal data on the characteristics of the individuals and families included in the observed sample is available. Only with this data in hand is it possible to verify how values, attitudes and behaviours change throughout people’s life cycles or due to exogenous shocks (Frijters et al., 2004 and 2011; Beatton and Torgler, 2018; Etilé et al., 2020). For a certain number of countries, the availability of contextual information in surveys would make it possible to verify how external factors, such as habits, emotions and even weather conditions, can influence a taxpayer’s behaviour. More intense collaboration between scholars from different disciplines and with public administrations and governments could ultimately offer beautiful opportunities for field experiments.

Therefore, this session aims to study more thoroughly – also historically (with literature reviews and representations of the current state of the art on the most debated topics) – the behavioural approach to the problems of taxation and to explore the challenges described above, taking advantage of the opportunities offered by the availability of the new database, by collaboration with scholars from other disciplines, including legal ones, and by the digitalisation process of public administrations. Behavioural economic theories definitely suggest that, overall, the relationship between tax authorities and taxpayers can undoubtedly improve by implementing organisational strategies more focused on facilitating spontaneous or collaborative compliance. However, to make this approach to the study of taxation and taxpayer’s behaviour truly concrete, it is now more than ever necessary not to become fossilised, that is, not to remain stuck in the same areas, techniques and methodologies for too long, but to insist on the search for reliable data, new tools and methods of data analysis and as well as in the development of interdisciplinary and comparative studies.

• Allingham, M., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, (1)3-4, 323-338.
• Alm, J. (2019). What motivates tax compliance?. Journal of Economic Surveys, 33(2), 353-388.
• Alm, J., & Torgler, B. (2006). Culture differences and tax morale in the United States and in Europe. Journal of Economic Psychology, 27(2), 224-246.
• Alm, J., Martinez-Vazquez, J., & Torgler, B. (2010). Developing alternative frameworks for explaining tax compliance. London: Routledge
• Alm, J., & Torgler, B. (2011). Do ethics matter? Tax compliance and morality. Journal of Business Ethics, 101(4), 635-651.
• Alm, J., Blaufus, K., Fochmann, M., Kirchler, E., Mohr, P., Olson, N. E., & Torgler, B. (2020). Tax Policy Measures to Combat the SARS-CoV-2 Pandemic and Considerations to Improve Tax Compliance: A Behavioral Perspective, FinanzArchiv/Public Finance Analysis, 76, 396-428.
• Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, 36(2), 818-860.
• Arrow, K.J. (1970). Uncertainty and the evaluations of public investments. American Economic Review, 53, 941-973.
• Beatton, T., & Torgler, B. (2018). Volunteering and life or financial shocks: does income and wealth matter? Applied Economics, 50(19), 2190-2209.
• Becker, G.S. (1968). Crime and punishment: An economic approach. Journal of Political Economy, 76(2), 169-217.
• Bickley, S. J., & Torgler, B. (2022). Behavioural economics, what have we missed? Exploring “classical” behavioural economics roots in AI, cognitive psychology, and complexity theory. In M. Altman (ed.) (2022), Handbook of research methods and applications on behavioural economics. Cheltenham-Northampton: Edward Elgar.
• Dhami, S., & al-Nowaihi, A. (2007). Why do people pay taxes? Prospect theory versus expected utility theory. Journal of Economic Behavior and Organization, (64)1, 171-192.
• Engel, E., & Hines, J.R. (1999). Understanding tax evasion dynamics. NBER Working Papers, No. 6903.
• Etilé, F., Frijters, P., Johnston, D.W., & Shields, M. (2020). Psychological resilience to major socioeconomic life events, IZA Discussion Papers, No. 13063, Bonn.
• Frijters, P., Gangl, K., & Torgler, B. (2021). How to Tax the Powerful and the Sophisticated?, in Erdogdu, M., Batrancea, L., & Cevik, S., (Eds.). Behavioural Public Finance: Individuals, Society, and the State. Routledge International Studies in Money and Banking. London: Routledge.
• Frijters, P., Johnston, D.W., & Shields, M.A. (2011). Life satisfaction dynamics with quarterly life event data. Scandinavian Journal of Economics, 113(1), 190-211.
• Frijters, P., Haisken-DeNew, J. P., & Shields, M. A. (2004). Money does matter! Evidence from increasing real income and life satisfaction in East Germany following reunification. American Economic Review, 94(3), 730-740.
• Hashimzade, N., Myles, G.D., &Tran-Nam. B. (2012). Application of behavioural economics to tax evasion. Journal of Economic Surveys, Online Version, doi: 10.1111 / j.1467-6419.2012.00733.x.
• Hokamp, S. (2014). Dynamics of tax evasion with back auditing, social norm updating, and public goods provision–An agent-based simulation. Journal of Economic Psychology, 40, 187-199.
• Torgler, B. (2012). A Field Experiment on Moral Suasion and Tax Compliance, CREMA Working Papers, No. 2012-06.
• Torgler, B. (2007). Tax compliance and tax morale: a theoretical and empirical analysis, Cheltenham: Edward Elgar.
• Torgler, B. (2003). To evade taxes or not to evade: that is the question. The Journal of Socio-Economics, 32(3), 283-302.
• Yitzhaki, S. (1974). A note on Income tax evasion: A theoretical analysis. Journal of Public Economics, (3)2, 201-202.

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Topics

• Behavioural approach to the economic analysis of the taxpayer’s decision-making.
• Determinants of tax evasion intention.
• Measuring, explaining, and controlling tax evasion.
• Applications of Behavioural Approach to tax evasion.
• Behavioural insights for better tax administration.
• Law, Economics, Sociology and Psychology of tax compliance.
• Designing policies and other interventions to the taxpayer’s change behaviours.
• Digitalisation as an amplifier in the taxpayer’s behavioural changes.
• Impact of tax justice on economic growth.
• The application of tax psychology/tax sociology and behavioural sciences to tax compliance.

BETA 2025 welcomes empirical, experimental, theoretical, and methodological papers that address these or related questions from various disciplines and perspectives. Specifically, we invite researchers and scholars to submit papers that contribute to developing research methods and theoretical frameworks of behavioural law and economics in the context of taxation and the contemporary redistributive agenda. Applied papers should discuss new initiatives, best practices, and lessons learned in the broader social science area so that practitioners, academicians, and information professionals can benefit from the emerging knowledge gained. Strictly empirical, computational, and lab or field experimental studies are also welcome. Finally, we encourage papers on quantitative and qualitative methods addressing interdisciplinary research approaches. Analytical and methodological papers should contribute to formulating quantitative hypotheses, meticulously gathering and thoroughly interpreting data, and planning or conducting experiments or surveys, providing clear guidance for researchers who want to use a particular research method. Theoretical papers should develop or refine theoretical frameworks in the field of study. We welcome papers that propose new theoretical models or frameworks, as well as papers that critique and refine existing ones. Furthermore, theoretical papers should be based on a sound theoretical foundation and offer instructions to researchers on how to replicate them. Papers will be judged on novelty, significance, correctness, and clarity.