TAX EVASION AND MORAL CONSTRAINTS - SOME EXPERIMENTAL-EVIDENCE

Tax evasion has been mainly studied as a problem of choice under uncer tainty; like any portfolio manager, the taxpayer has to allocate her/h is fixed gross income between two assets: a risky asset, tax evasion, and a safe asset (with a zero return), tax payment. As suggested by th e portfolio theory, the taxpayer's choice will be affected by her/his preferences - mainly by her/his attitude towards risk-taking - and by the return on the risky asset determined by the tax structure, which i ncludes both the tax rate and the penalties in the case of evasion. Ho wever, the pure gamble model appears unsatisfactory on various grounds . Among these and most importantly for our purpose, it neglects the ps ychological aspects of the decision to evade tax because it rules out any feeling of shame about evading or being detected and punished, and it ignores any intrinsic pleasure from successful evasion. In other w ords, the pure gamble model does not take full account of the moral co nstraints involved in the tax evasion decision. The main objective of the experiment presented here was therefore to investigate the role pl ayed by moral constraints in determining the decision to evade taxes. The experimental evidence supports the thesis that the taxpayer's deci sional process involves not only monetary elements but also psychologi cal and moral factors.