Tax Compliance

Printed in:
Journal of Economic Psychology, 28, (2007), pp. 704727

A Self-Interest Analysis of Justice and Tax Compliance: How Distributive Justice

Moderates the Effect of Outcome Favorability

Peter Verboon
Marius van Dijke

Correspondence concerning this article should be addressed to Peter Verboon,

Department of Psychology, Open University, P.O. 2960, 6401 DL, Heerlen, the
Netherlands, Tel: *31-10 2771480, Email: Peter.Verboon@ou.nl

Tax Compliance

Abstract
Compliance with tax authorities has been studied mainly in the fields of
economics and psychology. The focus has respectively been on self-interest motives and
justice concerns in tax compliance. We argue that both concerns are less divergent than is
often thought. Specifically, we studied the moderating role of distributive justice on the
relationship between outcome favorability and tax compliance in two cross-sectional
surveys. It is generally believed that favorable outcomes increase compliance because
they decrease what can be gained from non-compliance. The present research addresses
the role of distributive justice in this process. Since people believe that distributive
fairness guarantees their long-term outcomes, favorable present outcomes now imply
favorable future outcomes and unfavorable present outcomes now imply unfavorable
future outcomes. Thus, we expected fair outcomes to result in a strong relationship
between outcome favorability and compliance. On the basis that unfair outcomes are
believed to result from chance, outcome favorability should have a weaker relationship
with compliance when outcomes are unfair. Even when controlling for other variables,
this prediction was supported by both studies.

Key words: Tax compliance; distributive justice; outcome favorability; self-interest

Tax Compliance

A Self-Interest Analysis of Tax Compliance: How Distributive Justice Moderates the

Effect of Outcome Favorability
In recent decades, the study of tax compliance has become increasingly important
(for an overview, see Kirchler, 2007). Tax compliance refers to the willingness of people
to comply with tax authorities by paying their taxes. Modern societies rely heavily on the
fact that most people comply with tax laws. It is therefore important to understand why
people comply with tax authorities and thereby identify mechanisms that underlie
peoples decisions to be compliant or not. This knowledge may guide authorities towards
the development of strategies that strengthen compliance and fight non-compliance.
Attempts to understand the processes involved in tax compliance have been pursued in
two lines of research. The first focuses on how peoples desire to maximize their selfinterests can be aligned with, or countered by, tax systems. This approach, based on the
formal economic model of Allingham and Sandmo (1972), has dominated economic
analyses of tax compliance (Andreoni, Erard, & Feinstein, 1998). The second line of
research utilizes psychological and sociological analyses of tax compliance. Here, the
focus is on the interaction between tax authorities and citizens, on norms that guide
citizens behavior, and on the fairness of tax systems and tax outcomes ( Kirchler &
Hoelzl, 2006).
Economic and psychological approaches are often viewed at best as complementary,
and at worst as mutually exclusive approaches. The present research attempts to increase
our understanding of why people comply with tax authorities by showing that economic
and psychological approaches are not necessarily as divergent as is often thought. More
specifically, because self-interest considerations play an important role in why people
care about distributive justice (e.g., Brockner & Wiesenfeld, 1996; Skitka, 2003), we
argue that the degree to which tax outcomes are perceived to be fair should play an

Tax Compliance

important role in a self-interest analysis of tax compliance. The present study therefore
examines the moderating role of distributive justice in the relation between the
favourability of tax outcomes and compliance with tax authorities. It should be noted,
however, that whilst we are not the first to propose an integration of economic,
psychological, and sociological analyses of tax compliance (e.g., Cullis & Lewis, 1997),
our research attempts to directly test predictions derived from an explicit integration of
these views.
From a theoretical perspective, the present study aims to increase our understanding
of the interactive processes of two concepts in the context of tax compliance, concepts
considered by many to be interchangeable (Brockner & Wiesenfeld, 1996; Skitka,
Winquist, & Hutchinson, 2003). As argued below, the study may also help clarify the
divergent findings of previous studies, which sometimes found support for the role of
distributive justice in tax compliance, and sometimes did not. (e.g., Alm, McClelland, &
Schulz,1992; Webley, Morris, & Amstutz, 1985). From a practical perspective, we also
aim to emphasize that tax authorities should view outcome favorability and outcome
fairness as separate constructs that both need to be considered in order to enhance
compliance with decisions of tax authorities.
Self-Interest and Tax Compliance
The traditional economic approach of tax compliance (Allingham & Sandmo, 1972)
views tax payers as rational actors who intend to maximize their profits. In this approach,
it is assumed that peoples decisions to comply with tax authorities are motivated by
economic self-interest. In order to counterbalance the profits that can be gained from
non-compliance, authorities attempt to deter people from tax evasion with threats of
penalties and fines. The key concept in this analysis is deterrence, which is often split up
into two sub-concepts: the probability that tax evasion is detected and the severity of

Tax Compliance

sanctions. According to the economic model of tax compliance, it is chiefly the

interaction between probability of detection and sanction severity that should affect noncompliance. Some important empirical and review studies about the effects of deterrence
on compliance include: Williams and Hawkins (1986), Klepper and Nagin (1989),
Paternoster (1987), Carrol (1987), Fisher, Wartwick, & Mark (1992), Hessing et al.
(1992), Hasseldine (2000) and Torgler (2002) and recently Kirchler (2007). From these
studies we may conclude that both the probability of detection and the severity of
sanctions generally have minor positive effect on compliance. However, the uneven
nature of previous findings indicates that the causal relation between deterrence and
compliance has yet to be fully understood.
Perhaps the most obvious limitation of the economic self-interest analysis of tax
compliance is that it cannot account for the relatively high levels of observed tax
compliance (Bordignon, 1993). In other words, if deterrence (i.e., probability of detection
and sanction severity) would be the most important variable in explaining compliance,
rational people in most countries of the world would be non-compliant because levels of
deterrence are generally low (Graetz & Wilde, 1985; Porcano, 1988; Elffers, 2000,
Braithwaite, 2003). Moreover, contrary to predictions of economic models, Frey (2003)
reported that deterrence can even have a negative effect on compliance. That is, people
sometimes evade more when deterrence rises. Indeed, he maintains that too much
deterrence may decrease the intrinsic motivation to comply (the crowding out effect).
Nevertheless, as argued below, self-interest motives can be important in analyses of
tax compliance. Rather than focusing on the means that authorities have to counter
noncompliance i.e., deterrence we focus here on how authorities can align tax payers
self-interests with compliance. A relevant finding that is consistent with a self-interest
view of tax compliance is that if people consider the outcomes of the decisions made by

Tax Compliance

authorities as favorable, then they are generally more willing to co-operate and be
compliant; conversely, unfavorable outcomes can negatively affect compliance with tax
authorities (Murphy, 2004). Favorable outcomes in a taxation context usually refer to
having to pay less tax than was expected. Presumably, people are more willing to comply
with tax authorities when their decisions or those of the tax system are considered
favorable because they expect less to gain from being noncompliant (Wenzel, 2002).
Justice and Tax Compliance
To understand the high observed levels of compliance, approaches other than purely
economic ones have been proposed (i.e., Cullis & Lewis, 1997). Sociological and
psychological insights have proved to be important in understanding the high levels of
compliance (Scholz & Lubell, 1998; Alm, McClelland, & Schulze, 1999; Braithwaite,
2003; Wenzel, 2004a). In such analyses, concepts like trust in authorities (Murphy, 2004),
perceived fairness of the tax system (e.g. Porcano, 1984; Tyler, 1990; Wenzel, 2004a),
and moral considerations and norms (Frey, 2003; Wenzel, 2004b) are used to foster a
more comprehensive understanding of tax compliance. For an overview, see Kirchler
(2007). The present study addresses the role of justice in compliance with tax authorities
by examining the effect of distributive justice in this process.
Distributive justice refers to perceptions of the extent to which outcomes match
implicit norms, such as equality or equity. Equity theory (Adams, 1965) states that in
exchange relations, people compare the ratio of their contributions (e.g., effort) and
compensation (e.g., money) with others contribution/compensation ratio. Thus, when people
apply the equity norm, they may think it fair that others earn more than they do when these
others work harder. When contribution/compensation ratios are unequal, people are
dissatisfied and attempt to equalize them, for instance by decreasing their effort (Walster,
Walster, & Berscheid, 1978). In the taxation context, distributive justice refers to the feeling

Tax Compliance

that everyone pays his fair share of taxes, and that one does not pay too much (or too little). If
society does not offer enough (tax funded) resources compared to the amount of tax one must
pay, this may lead to feelings of distributive injustice (exchange inequity). Comparison of
ones own tax burden to that of others who pay less can also cause feelings of distributive
injustice (horizontal inequity; Dean, Keenan, & Kennedy, 1980).
A general explanation of why people care about distributive justice is that it ensures
optimal personal outcomes in the long run (e.g., van Avermaet, McClintock, & Moskowitz,
1978; Brockner & Wiesenfeld, 1996; Walster, Walster, & Berscheid, 1978; see Skitka, 2003,
for a theoretical account; see Tyler, Boeckman, Smith, & Huo, 1997, for an overview of
empirical research; see Wenzel, 2002, for a somewhat different view; we return to this in the
discussion). Fairly distributed outcomes make people believe that their outcomes are
guaranteed in the long run (i.e., they expect to share in the societal provisions that are paid for
taxes ). Unfair outcomes, on the other hand, are believed to result from unstable and
unpredictable forces, giving people no reason to support the distribution rules or the
authorities responsible for these rules. Consequently, it is often more profitable to let ones
behavior guided by the fairness of outcomes (i.e., by complying with authorities) rather than
by short-term personal profits because fair outcomes guarantee long term profit. In sum, as
this analysis elucidates, self-interest is a guiding principle which explains why people value
fair outcomes.
Distributive justice is considered to play an important role in the process of tax
compliance (Tyler, 1997; Wenzel, 2003). Nevertheless, the reported effects of distributive
justice on compliance are not always consistent. Whilst positive effects are found in some
studies, others report none. In an experimental study, Spicer and Becker (1980) showed
that an unfair ratio of ones own tax burden with that of others can lead to tax noncompliance. However, the validity of this study is questionable because the participants

Tax Compliance

were explicitly instructed to maximize their own profit, thereby framing the study as a
(short term) self-interest situation. An experiment by Alm, McClelland, and Schulz
(1992) further supported the negative effect of inequity on compliance. Equity principles
were also experimentally tested by Moser, Evans, and Kim (1995) and Kim, Evans, and
Moser (2005) within an economic self-interest framework. In these studies it was shown
that justice and economic considerations are both of importance in explaining the amount
of reported income (under-reporting thus implicating tax evasion). These studies were
laboratory experiments designed to mimic a real life taxation context. Another form of
distributive justice, the effect of changes in taxation on peoples reported compliance,
was investigated by Calderwood and Webley (1992). They found that people who felt that
they had unjustifiably paid more than before negatively affected their compliance. A
similar result was reported by Porcano (1988), who found that the perceived exchange
inequity likewise negatively affects compliance. Finally, these findings are corroborated
by Maroney, Rupert, and Anderson (1998) who concluded that the perceived injustice of
taxing a particular income type may even affect the compliance on other income types.
However, in a study by Webley, Morris, and Amstutz (1985), the equity effect on
tax evasion was not found although this might have attributable to flaws in the
experimental design (Webley et al., 1991). Having said that, Mason and Calvin (1978)
found no relation between exchange and horizontal equity perceptions and self-reported
compliance either. Furthermore, in a comparison of convicted tax evaders and non
evaders, Wallschutsky (1984) likewise found no differences in exchange equity
perceptions. However, this may have resulted from flaws in the procedure because
subsequent interviews with the respondents revealed that exchange equity was an
important factor in evasion decisions.
In conclusion, although some studies failed to reveal distributive justice effects on

Tax Compliance

tax compliance, there remains strong evidence that the various forms of distributive
justice play an important role in establishing tax compliance. Whilst this general
observation provides the staring point for the present study, it adopts a different
approach. Below , we develop the argument that distributive justice is important for
understanding tax compliance, not only because it directly affects compliance, but also
because it affects how other variables are implicated .
The Role of Self-Interest in Social Justice
In line with previous research, we expect that distributive justice will have a
positive effect on tax compliance (Hypothesis 1). On the basis of other studies (e.g.,
Murphy, 2004; Wenzel, 2002), we also expect outcome favorability to positively affect
tax compliance (Hypothesis 2). Note that although distributive justice is related to
outcome favorability, social scientists often substitute one construct for another (e.g.,
Brockner & Wiesenfeld, 1996) despite the fact that each has a distinct conceptual
meaning (Skitka, Winquist & Hutchinson, 2003). Outcomes can be favorable without
being fair. To illustrate this difference in the context of taxation , receiving a tax refund
because of tax deduction related to a mortgage is probably viewed as a favorable
outcome. Nevertheless, this outcome may be considered unfair if one discovers that the
neighbor received a larger refund for owning a bigger house with a larger mortgage.
Most importantly, we expect that the relationship between outcome favorability and
compliance with tax authorities is contingent on the extent to which tax outcomes are
considered distributively fair. As noted above, the more taxpayers consider outcomes of
tax decisions as favorable to themselves, the less they should expect further gains from
tax noncompliance; as such, they can be expected to be more compliant to the tax office.
However, we expect that this effect is stronger when outcomes are also viewed as fair.
Specifically, a fair distribution of outcomes makes people expect that outcomes are

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10

guaranteed in the long run. It should therefore follow that outcome favorability has a
positive effect on tax compliance when outcomes are also considered to be fair because
favorable present outcomes imply favorable future outcomes. Unfavorable outcomes
should result in relatively low levels of compliance because the unfavorable present
outcome suggests unfavorable future outcomes. However, when tax outcomes are
considered distributively unfair, people believe that the favorability of their outcomes is
unpredictable. The tax office may in the future make favorable or unfavorable decisions,
but this is hard to tell. In this situation, we expect a weaker relation between outcome
favorability and compliance because the outcome of the taxpayers contribution is
unpredictable and there is no reason to support the taxation system.
Study overview
In sum, we expect that distributive justice and outcome favorability positively
affect compliance (Hypothesis 1 and 2, respectively), and, more importantly, that the
positive effect of outcome favorability on compliance is particularly strong if people
experience relatively high levels of distributive justice. If distributive justice is
considered to be low, we expect the effect of outcome favourability to be weaker. In
other, words we expect that distributive justice moderates the positive effect of outcome
favorability on compliance (hypothesis 3).
Our hypotheses were tested with two cross sectional surveys. The first survey
consists of data that are annually collected by the Dutch tax office across a representative
sample of Dutch private tax payers. The second survey was designed to address some
shortcomings in the first study. Here we collected data from a representative sample of
Dutch employees. We decided to use the survey method because the causal effects of
distributive justice and of outcome favorability on tax compliance appear clear. An
advantage of using a representative sample of the population is that conclusions can be

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11

generalized to the relevant population, while controlling for a host of other relevant
variables. In addition to controlling for demographic variables, we controlled for the
effects of self-interest other than outcome favorability. Thus, the deterrence concepts
probability of detection and severity of sanctions are also taken into account.
Furthermore, perhaps the most important factor in explaining tax compliance is peoples
personal tax norm (also referred to as personal tax ethics or personal tax morale, see
Torgler, 2002; Wenzel, 2004a; 2004b; 2005).
Tax morale is usually defined as the intrinsic motivation to comply. Most studies,
like ours, take personal norm or tax morale as an explanatory variable for predicting the
the level of compliance. One of the earliest studies by Schwartz and Orleans (1967)
showed that moral appeals were more effective than deterrence in increasing compliance.
Research, primarily by Torgler, has highlighted those factors that may be important for
increasing tax morale (e.g. Torgler, 2003; Torgler & Murphy, 2005). Important factors
that positively influence tax morale are trust in the authorities and religiosity. In some
situations, sanctions may also increase personal norm, provided that the authority
exercising the sanction is trusted (Mulder, Verboon, de Cremer, 2007). Although personal
norm is not necessary affected by self-interest considerations, the results may be
seriously biased if the effect of this variable is not controlled. Therefore, personal norms
are also taken into account.
Study 1: Dutch Fiscal Monitor
Method
Participants. The first study used data from the Dutch Fiscal Monitor Survey (Van
Altena & Verschoor, 2006) which was based on a random sample of 744 Dutch citizens
aged 16 years and above . The sample consisted of 401 men (54%) and 343 females
(46%): 37% were younger than 40 years, 36% were between 40 and 60 years, and 27%

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12

were older than 60 years of age. Of the respondents, 3% had only received a primary
education , 33% had followed their primary education with secondary education only,
29% had followed their secondary education with vocational education, and 34% had
attended university. About 23% of the respondents lived alone , 31% resided in a twoperson household without children, and 41% were (married) couples with children. The
remaining respondents (5%) lived in an alternative form of household. Over two-third of
the respondents (70%) owned the property in which they were living , whilst the
remaining 30% lived in rented accommodation. . About 4% of the respondents were
entrepreneurs, 11% worked within the civil service, 49% were employed in the
commercial sector and 36% were currently unemployed or retired.
Procedure. The data were collected by a marketing bureau that uses an access
panel which is representative of the Dutch population. Two types of data collection were
used. From their database, respondents were randomly selected (N = 176, 24%) from a
subpopulation of people without a computer or not connected to the internet. For this
group face-to-face interviews were used. The remaining respondents (N = 568, 76%)
were randomly selected from the database and requested to fill in an electronic
questionnaire on the internet. The interviews were conducted by professional
interviewers. Participants were told that the confidentiality of their responses was
guaranteed. By using a laptop computer, participants could type their answers out of sight
of the interviewer to avoid social desirability bias on some of the sensitive questions.
Confidentiality was also guaranteed to the respondents that used the internet
questionnaire.
Measures. Tax compliance was measured with five items (Cronbachs = .85): the
intention to evade paying income tax or exaggerating deductions, how one felt about not
evading income tax or exaggerating deductions, and the acceptability of tax evasion. For

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13

instance, intention was measured by: If I had the possibility, I would evade paying
taxes (1 = completely agree, 7 = completely disagree). The average score over the five
items was taken as an index for tax compliance.
In order to measure perceived deterrence, we distinguished the concepts of
detection probability and sanction severity. Sanction severity was measured with four
items (Cronbachs =.65). Respondents indicated on a seven-point scale (1 = very
unlikely, 7= very likely) how likely they thought a particular sanction for tax evasion was.
The items referred to: paying the tax with a relatively small fine, paying a substantial
fine, being audited in more detail in the future , and criminal prosecution. These items
were similar to the ones reported in Wenzel (2002, 2004a).
Probability of detection was measured with three items (Cronbachs =.61): the
probability of being detected after under-reporting income or exaggerating deductions,
the probability that the tax office finds out that someone has received cash-in-hand
payments, and the probability that the tax office finds out about fiscal constructions (1 =
very low, 7 = very high). The three topics were based on Wenzel (2002, 2004a). The
average score over the three items was taken as an index for probability of detection.
Distributive justice was measured with one item: In my opinion the tax office takes
care that everyone pays the right amount of tax (1 = completely disagree, 7 = completely
agree).
Two items (r = .34) were used to measure outcome favorability. The items were
derived from Tylers (1997) instrumental judgment index. The items were: Decisions of
the tax office are favorable to me and I usually agree with the decisions of the tax
office (1 = completely disagree, 5 = completely agree).
Finally, personal tax norm was measured with I feel morally obliged to honestly
declare all my tax liabilities. The appendix presents the exact wording of all items.

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14

Analyses. The hypotheses were tested using hierarchical regression analyses. Five
demographic characteristics were assessed: gender , age ( < 40, 40 60, > 60), education
(seven levels), household type (single/ more than one person), and religion ( Roman
Catholic, protestant, other religion, no religion). These variables were used as control
variables in the regression model. The variables age, education and religion were first
analyzed with the SPSS Catreg procedure (Van der Kooij, Meulman, & Heiser, 2004) to
obtain optimally scaled categories for these variables. This provided nominal
transformations of age and religion and ordinal transformations of education. Scaled
categories may reveal nonlinear relationships between these variables and the dependent
variable. As such, the scaled categories were entered in the first step of the ordinary least
squares regression.
In step two, the deterrence variables (probability of detection and sanction severity)
were entered together with their interaction. In step three, both the main effects of the
psychological variables(distributive justice and outcome favorability) and their
interaction were entered. Personal tax norm was entered in the final step. To avoid
multicollinearity, the interaction terms were derived from standardized versions of the
predictors (Aiken & West, 1991). Subsequently, simple slopes analyses were performed
to clarify the interaction effect of distributive justice and outcome favorability.
Results
The scaled categories of age showed that age had a nonlinear relationship with
compliance (larger scaling values indicate more compliance). The youngest group (below
40) obtained a scaling value of 0.00 (approximately the mean), the 40-60 year group a
value of -1.09, and the older group a scaling value of 1.45. People above 60 appeared to
be more compliant than the others, whereas the middle group was the least compliant.
The four categories of religion clearly differed on compliance: Protestants (0.72),

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15

and even more so people with another religion (3.52), were the most compliant. People
without religion were the least compliant (-0.77), and Catholics were somewhere in the
middle (-.05). Education was virtually linearly related to compliance: higher education
indicates more compliance.
Table 1 shows descriptive statistics of the variables and intercorrelations. All
independent variables have significant but weak correlations with compliance; only
personal tax norm is strongly correlated with compliance. Except probability of detection
and sanction severity, all independent variables are correlated with each other. The
personal tax norm (M = 4.21, SD = 0.81) proved to be particularly high.
Results of the hierarchical regression analysis are shown in Table 2. 1 In Step 1,
gender , age, education and religion significantly affect compliance. Women indicated
higher compliance than men. Age, religion and education, all scaled as noted above, had
the same effects as were observed in the Catreg procedure.
In the second step, both probability of detection and perceived severity of sanctions
significantly affected compliance. However, the interaction between the two deterrent
variables was not significant. The deterrence variables add a significant 3% to the R2.
In step three, the interaction between distributive justice and outcome favorability
was positive and significant, which supports our hypothesis that outcome favorability has
a stronger effect on compliance if distributive justice is high. The interaction term
yielded a small but significant 2 contribution to the R2. The main effect of outcome
favorability was only marginally significant whereas the main effect of distributive
justice was not significant.
The final step showed that the personal tax norm is a very important predictor of
compliance (adding about 11% to the R2). However, even with personal tax norm in the
model, the interaction between outcome favorability and distributive justice was still

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16

significant.
The results of the simple slopes analysis further support our expectations (see
Figure 2). When distributive justice is low (that is, 1 SD below the mean), outcome
favorability did not significantly affect compliance ( = -.07, n.s.). When distributive
justice is high (1 SD above the mean), outcome favorability significantly, and positively,
affected compliance ( = .12, p < .05).
Study 2: Dutch Employees Survey
The results of study 1 clearly support our central prediction: The positive effect of
the favorability of tax outcomes on compliance with the tax authorities depended on the
extent to which these outcomes were perceived to be fair. Specifically, only when
outcomes were viewed as fair did outcome favorability positively affect tax compliance.
When outcomes were unfair, outcome favorability was unrelated to tax compliance.
Importantly, these results were obtained while controlling for the effects of a host of
known important variables that affect tax compliance, varying from structural
background variables, such as education level and income to psychological variables,
such as perceived deterrence.
Although these results are promising, they demand replication. Moreover, study 1 is
obviously not without its limitations. Therefore we conducted a subsequent study to
replicate the findings of study 1 and to address several of its shortcomings in measuring
key concepts of our model. First, in study 1, distributive justice was measured with one
item only. Although this item clearly refers to justice and distributional aspects of tax
paying, it can be argued that it is limited in focus. In fact, the item refers to an evaluation
of the tax offices efficiency in its dealings with fair distributions of tax burdens. In order
to more comprehensively measure this concept, distributive justice in study 2 was
measured with five items. Second, in study 1, outcome favorability was measured with

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two items taken from Tyler (1997), which referred to outcome favorability of the tax
offices decisions. We added an additional item that directly focused on actual tax
liability (i.e., the favorability of tax outcomes), without referring to procedures.
Method
Procedure and participants. The sample was extracted from the national postal
guide. Extraction criteria were that people worked for an organization for at least eight
hours a week and that they had a supervisor. Only those who had given permission to
disclose their address for research purposes were included. 973 Dutch people were sent a
letter inviting them to participate in a study about experience at work in The
Netherlands by filling out the enclosed questionnaire and returning it to the researchers
in the prepaid envelope. It was also explained that there were no right or wrong
answers, that the questionnaire would take about twenty minutes to complete, and that
participation would be completely anonymous. Of these 973 questionnaires, 16 were
returned because the addressee no longer lived there. This left 957 questionnaires that
actually reached the intended respondents. A reminder was sent to all intended
respondents two weeks after the first mailing.
In total, 359 questionnaires were returned (38 %). The response rate is somewhat
higher than other studies in this area, for instance the Australian Hopes and Fears Survey
(Braithwaite, 2000) which had a response rate of 29%. The sample consisted of 65 %
males and 35 % females. Of the respondents, 2 % had only received primary education ,
39 % had followed their primary education with secondary education only, 25 % had
followed their secondary education with vocational education, 23 % had a bachelor
degree, 9 % had a masters degree, and 1 % indicated they had received an another type
of education. About 38 % had a net monthly salary below 1500, 35 % earned between
1500 and 2000, 14 earned between 2000 and 2500, and 14 earned more than 2500.

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The mean age was 42.71 (SD = 10.26). The respondents had worked, on average, for
11.94 years with their current organization (SD = 10.66) and had been in their current job
for 8.49 years (SD = 9.93).
Measures. Tax compliance was measured with three items (Cronbachs = .68).
The items consisted of statements about hypothetical cash-in-hand payments, for example
Under certain circumstances I may choose not to declare my cash payments (1 =
completely agree, 5 = completely disagree). The average score over the three items
provided an index for tax compliance.
To measure perceived deterrence, we again distinguished between the concepts of
probability of detection and sanction severity. Sanction severity was measured with one
item that directly asked for the perceived severity of the sanction (1 = not severe, 5 =
very severe). Three items (Cronbachs = .62) measured probability of detection, for
example The probability of being detected when evading tax is low (1 = completely
agree, 5 = completely disagree).
Distributive justice was measured using five items (Cronbachs = .73). One
example is: It is unfair that some people have to pay lower taxes than me but at the
same time take advantage of all sorts of benefits (1 = completely agree, 5 = completely
disagree).
Three items (Cronbachs = .72) were used to measure outcome favorability. Two
items, like in the first study, were based on Tyler (1997). The third additional item was :
When I receive my tax liabities , it is usually higher than I expected(1 = completely
agree, 5 = completely disagree).
Finally, personal tax norm was measured with the item I feel morally obliged to
pay all my taxes . The exact wording of all items can be found in the appendix.
Analyses. Hierarchical regression was used to analyze the data, with variables entered

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in the same steps as in Study 1. Again, the interaction terms were derived from
standardized versions of the predictors. Before the regression was conducted, optimal
scaling values of the demographic variables age (recoded in three categories; below 35,
between 35 and 50, and older than 50) without order restrictions and education (with
ordinal measurement restrictions) were obtained by the Catreg procedure.
Results
The optimally scaled values for the three age categories indicated the most
compliance amongst the oldeest group (1.41) and the least amongst the youngest (1.20). The middle group had the scaled value -.22. Thus, we found an ordinal
relationship between age groups and compliance. The enforced ordinal transformation of
education yielded a less smooth transformation than in the first study because the two
lowest categories obtained the same scaled value. Moreover, the two highest categories
also obtained the same scaled value. Figure 1 shows the transformations of education.
Only sex and age contributed significantly to the prediction of compliance.
Descriptive statistics of the variables and intercorrelations are shown in Table 3. All
independent variables had significant but weak correlations with compliance expect for
two: sanction severity which had a zero correlation with compliance; and personal tax
morale which has a strong correlation with compliance. All independent variables were
correlated except for probability of detection and outcome favorability. Sanction severity
was negatively correlated with personal tax morale and distributive justice, but positively
correlated with probability of detection.
Results of the hierarchical regression analysis are shown in Table 4. In the first step,
gender and age had significant effects, meaning as before that females indicated more
compliance than men, and that older people are more compliant.
In line with the first study, the second step showed that the probability of detection

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20

had a positive and significant effect on compliance. However, perceived severity of

sanctions had no effect on compliance. Again, the interaction between the two deterrent
variables was not significant.
When distributive justice, outcome favorability and their interaction were entered in
the regression model 3, both main effects and the interaction were significant.
Remarkably, the effect of education increased in this step but had a negative regression
coefficient.
In the final step, personal tax norm had a strong and significant effect on
compliance. The interaction between distributive justice and outcome favorability
remained positive and significant 4, which supports our hypothesis that outcome
favorability has a stronger positive effect on compliance if distributive justice is high.
Entering the personal tax norm weakened the effect of probability of detection, which
was no longer significant at p <.05. In addition, the main effect of distributive justice was
weakened when personal tax norm was entered, but it remained significant.
Figure 3 shows the results of the simple slopes analysis for the interaction. For
those people who experience relatively low distributive justice (that is, 1 SD below the
mean), outcome favorability had no significant effect on compliance ( = -.03, n.s.). For
those who experience high levels of distributive justice (1 SD above the mean), outcome
favorability had a strong effect ( = .25, p < .01) on compliance.
Discussion
Taken together, the results of both studies clearly support our central prediction that
the effect of outcome favorability on tax compliance is moderated by distributive justice.
Specifically, in both studies, no effect of the favorability of peoples outcomes on tax
compliance was found when distributive justice was low. And in both studies, we found a
significant positive effect of outcome favorability on peoples compliance with the tax

Tax Compliance

21

authorities decisions when distributive justice was high. Distributive justice is clearly
related to outcome concerns, and more specifically, concerns about the predictability of
ones outcomes (e.g., Skitka, 2003). Thus, the general argument that there is less to gain
from non-compliance as the authorities decisions become more favorable needs to be
qualified by the extent to which these decisions are viewed as predictable In short, there
is less to gain from non-compliance when outcomes are more favorable only when the
outcomes result from predictable decisions. The present study can therefore be viewed as
providing further evidence that peoples concerns for distributive justice derive from
self-interest motives. Furthermore, self-interest has proved to be an important
psychological factor underlying tax compliance .
One may question why we viewed distributive justice as a moderator of the effect
of the favorability of tax outcomes on tax compliance rather than viewing outcome
favorability as a moderator of the effect of distributive justice on tax compliance. In other
words, one could predict that the fairness of tax outcomes has a positive effect on
compliance with the tax authorities only when such outcomes are also favorable. We
believe that this view does not seriously change our argument concerning the
predictability of future outcomes. In a self-interest analysis of tax compliance, we expect
that people only value predictable outcomes resulting from distributively fair outcomes
when such outcomes are also favorable. When outcomes are unfavorable, predictability is
less likely to increase compliance with the tax authorities. Nevertheless, we believe that
it is interesting to note that viewing outcome favorability as a moderator of distributive
justice effects may explain some of the empirical inconsistencies of previous research,
which often found a positive effect of distributive justice on tax compliance, but
sometimes failed to reveal such an effect.
The support for our hypotheses concerning the main effects of outcome favorability

Tax Compliance

22

and distributive justice was less unequivocal. Both studies yielded positive and
significant correlations between outcome favorability, distributive justice, and
compliance, but the values were larger in study two (see Table 1 and 3, respectively). In
the regression model of study 1, the main effect of outcome favorability was not
significant, whereas in study 2, a significant main effect for outcome favorability was
found in the final specification. The main effect of distributive justice also differs
between the two studies: although a significant effect was found in study 2, no such
effect was found in study 1. One possible reason for this difference is that different
aspects of distributive justice were being measured (a similar argument was put forward
by Kirchler, 2007). In study 1, distributive justice refers to horizontal and vertical equity
whereas study 2 focused on exchange equity. The empirical differences between the two
studies may also be explained by differences in the way that the respective questionnaires
were framed (see Kahnemann & Tversky, 1979). The fiscal monitor consisted entirely of
tax related matters. In the employees survey, the compliance items were preceded by
items about working conditions and related issues. Framing effects are also present in the
tax context (Kinsey, Grasmick, & Smith, 1991; Verboon, 2006). Nevertheless, we believe
that the most parsimonious and likely explanation for the stronger effects in study 2 is
simply that we measured outcome favorability and distributive justice more reliably.
Further testimony to the validity of our results is that the interaction effect, which
was our primary concern, was found regardless of whether we controlled for
demographic and psychological background variables . Moreover, the results concerning
the demographic variables were generally in line with the literature (e.g., Spicer &
Lundstedt, 1976; Porcano, 1988). Women tend to be more compliant than men, and older
people are the most compliant (Wenzel, 2005). Interestingly, we found in the first study
that the youngest group was more compliant than the middle group. It may be interesting

Tax Compliance

23

to examine this phenomenon more carefully in future studies. In line with the literature,
religion was also found to be related to compliance (Grasmick, Kinsey & Cochran, 1991).
Religious people are generally more compliant than non religious people, which may be
due to a higher personal morale on ethical issues, like tax evasion. The effect of
education in study 1 mirrors the results reported by de Juan, Lasheras, and Mayo (1994)
who argue that higher educated people better understand why tax has to be paid and
therefore tend to be more compliant. In the second study, however, there was no direct
correlation between education and compliance, a result that was also reported by Wenzel
(2005). Moreover, after controlling for outcome favorability and distributive justice, the
regression coefficient of education became significantly negative in study 2. This
unexpected result may mean that people with similar attitudes about justice and outcome
favorability (i.e., the better educated ones) are less compliant.
The results concerning the effects of our psychological background variables are
also generally in line with the literature. First, the self-interest variable, probability of
detection, positively affected compliance in both studies, although in study 1 the effect
was rendered nonsignificant when personal tax morale was entered in the regression.
These results correspond to those reported by Wenzel (2004a). However, only in study
one was sanction severity positively correlated with compliance. It should be noted that
the absence of a sanction effect on compliance has been reported before (e.g. Varma &
Doob, 1998). Not finding an effect of sanction severity may also be due to the fact that in
the second study sanction severity was only measured with one general item , whereas in
study 1, respondents had to gauge the likelihood of four possible sanctions. Most
respondents probably have no experience with being sanctioned by the tax office. It thus
follows that a single, general question about how the severity of sanctions is perceived,
as was done in study 2, may not be a valid measure of this concept. Respondents should

Tax Compliance

24

preferably be presented with the actual consequences of their choice, as was done in the
first study, in order to more validly assess sanction severity 5. Moreover, the sanction item
from study 2 may have been interpreted as a judgment of the sanction system of tax
evasion, which would explain why this item correlated negatively with distributive
justice. People who do not agree with the tax office, or perceive distributive injustice,
tend to find sanctions too severe. Also in line with most of the literature, no support was
found for a multiplicative effect (Carroll, 1987) of the two deterrence concepts. In sum,
however, we maintain that regardless of whether deterrence is controlled , our main
conclusion about the effect of justice perceptions and self-interest on compliance holds.
The present study employed measures of perceived deterrence (i.e., perceived
probability of detection and perceived sanction severity). One may think that such
measures are prone to unnecessary biases. In fact, some experimental studies, have used
actual detection probability instead of subjective perceptions (Fischer et al., 1992).
However, focusing on perceived detection probability, as we did in the present study, has
several advantages. First, actual probability of detecting tax evasion, or even the actual
audit rate, is hard to estimate because in the Dutch tax system it depends partly on
random selection, partly on risk evaluation, and partly on specific campaigns. Second,
subjective estimation of the detection probability is more important for actual compliance
behavior and may only partly depend on actual probabilities. Andreoni et al. (1998) even
note that actual audit probabilities have little effect on compliance. They suggest that
moral obligations are related to overestimating the probability of detection. In this
respect, it is interesting to note that our findings, support Andreoni et als suggestion
since we found significant positive correlations between the personal tax morale and
perceived detection probability. .
We do not claim that distributive justice matters to people merely because of self-

Tax Compliance

25

interest considerations alone. Indeed, there is evidence that distributive justice concerns
can also derive from group interest concerns (e.g., Wenzel, 2001, 2004c). Specifically,
the categorization that people use to define themselves appears to be important in shaping
peoples entitlement beliefs: people believe that they are entitled to the same outcomes as
other members of their category. Deservingness (i.e., equity), on the other hand, appears
to be related to category defining characteristics. It seems worthwhile to pursue this line
of study in the context of compliance to tax authorities because this would surly broaden
our insights into a severely understudied phenomenon: namely; group level justice in the
context of tax compliance. For instance, some groups in society may have better
opportunities than others to minimize their tax burden and these can promote feelings of
intergroup injustice. Like distributive justice at the interpersonal level, we expect that
group level outcome favorability will interact in a similar way with this type of
distributive justice, because minimizing your tax burden is a typical self-interest concept,
for which the same argument could be used as was developed in the present study. The
difference that we expect is that people care about the extent to which their groups
outcomes are fair and favorable. In other words, we dont expect people, at least those
who strongly identify with their group, to pursue their own interests, but rather the
interests of their group.
In the literature on social justice, a robust finding is that outcome favorability
interacts with another type of justice: procedural justice. Distributive justice shows the
same interaction with procedural justice, which has been taken as evidence that outcome
favorability and distributive justice are to a large extent interchangeable; see for instance
Brocker & Wiesenfeld, 1996, 2003). Procedural justice refers to the fairness of
procedures, the fairness of their enactment by authorities, and the fairness of the
interpersonal treatment by authorities (see Colquit 2001, for an overview). As procedural

Tax Compliance

26

justice has been shown to play an important role in the process of tax compliance (see
Wenzel, 2003, for an overview), future research may wish to further investigate this
interaction effect . Importantly, the form that this interaction takes is different from what
we both predicted and found, i.e., regarding the interaction between distributive justice
and outcome favorability: Outcomes were found to have a weaker effect when procedures
were perceived to be fair. Moreover, this interaction cannot be explained by self-interest
explanations alone ; social identity based explanations clearly have a role in this
interaction. The implication for practice is that it is sufficient to focus on one concern
only: either procedural justice, or outcome favorability.
Interestingly, some research in the area of distributive justice already suggests that
the predicted interaction between procedural and distributive justice may be found in the
context of tax compliance. Indeed, Maroney, Rupert, and Anderson (1998) predicted
(from the equity control model) and found that inequity increases reluctance to comply
(i.e. tax evasion) when tax payers dont have control over their tax outcomes through
other means. Control, as operationalized in the equity control model, strongly echoes
process- and decision-control in the procedural justice literature (i.e. voice) and, as noted
above, this interaction effect (i.e., strong distributive justice effects when people have
low control over their outcomes when procedural justice is low) has been found in
numerous studies in the procedural justice literature (see Brockner & Wiesenfeld, 1996,
2003 for overviews). Thus, Maroney et als study not only provides initial evidence that
procedural and distributive justice have an interactive effect on tax compliance, but the
similarities between the models indicate that the equity control model may be extended to
include many more qualifiers of the effects of equity on tax compliance (e.g., bias
suppression, accuracy, but also interpersonal treatment by authorities; see for instance
Levanthal, 1980, and Bies & Moag, 1986).

Tax Compliance

27

Obviously, the present studies are not without their limitations. Both studies applied
a cross-sectional design, with all variables derived from peoples individual perceptions.
Not only are we unable to derive causal conclusions from this approach, but such a
design is also problematic because the main effects may be attributable to common
method bias. However, it should be noted that the interaction effect, which was of
primary interest, cannot be attributed to common method variance. On the contrary, as
common method bias tends to inflate main effects, it tends to suppress interaction effects
(McClelland & Judd, 1993; Evans, 1985). Thus, the limited proportion of variance
explained by our interaction should not be viewed as having limited practical
significance. Rather, finding the same interaction effect in both studies, with different
operationalizations of distributive justice, while moreover controlling for a host of
different demographic (i.e,. education, gender) and psychological (i.e., deterrence, tax
morale) background variables is strong evidence for its robustness.
A second limitation is that we were unable to include all variables that are known to
affect compliance. Therefore, we focused on the variables which we believed to be the
most relevant to illustrate our main point concerning the role of self-interest motives in
tax compliance. As such, variables like social norms (Wenzel, 2004a) and trust in the tax
authorities (Scholz & Lubell, 1998) were omitted .Nevertheless, by controlling for those
variables that we did include in the model, we have at least partly shown that our main
finding is robust in various model specifications.
A third limitation is that a survey study implies that people report their behavior, or
in this case, their behavioral intentions and attitudes. This has some predictive value for
actual behavior (cf. Beck and Ajzen, 1991), but reported intentions and actual tax paying
behavior may also be inconsistent (Elffers, 1991). However, it should be noted that
although the reported intentions may not be a direct predictor for actual tax compliance

Tax Compliance

28

behavior, our compliance measure is closely related to personal tax morale (Feld & Frey,
2002; Wenzel, 2004b), which is one of the most important explanatory concepts of actual
compliance (Wenzel, 2004a). Indeed, in both studies, a direct measure of personal tax
morale was strongly correlated with the tax compliance measure. And the presence of this
important variable did not substantially influence the interaction between outcome
favorability and distributive justice, thereby indicating the robustness of this effect.
A fourth limitation derives from the implicit causality claims of the models
presented. Of course, cross-sectional designs can be misleading because important
specifications may be missing or because the presumed causal effect is the other way
around. For instance, Kirchler (2007) remarked that justice perceptions may be a
rationalization of tax compliance instead of, or in addition to, a cause of tax compliance.
There is also empirical evidence for this : Wenzel (2005) showed with cross-lagged panel
data that there is, indeed, a causal relation between tax morale, justice perceptions and
compliance, and that the direction of causality can be both ways. Thus, there is evidence
that justice perceptions cause compliance, but such perceptions can also be constructions
to rationalize (non-) compliant behavior.
The same causal ambiguity exists in interpreting the relationship between
deterrence and compliance. People may report higher levels of deterrence as a
rationalization of their compliance. We have tried to tackle the causality problem by
searching for adequate instrumental variables to be used in a two-stage least squares
approach. Unfortunately, no variables were suiteable for this purpose.
However, as noted in the introduction, experimental studies have yielded strong
evidence that justice concerns affect compliance. And, in the extensive literature on
social justice, many of these studies have shown that distributive justice, as well as
outcome favorability, directly affect variables that are conceptually related to tax

Tax Compliance

29

compliance (e.g, compliance with authorities; see for instance Colquit et al., 2001, and
Cohen-Charash & Spector, 2001, for meta analyses). Therefore, building on these results,
and on the basis of theoretical predictions supported in a variety of different domains, we
are confident that our reasoning accurately reflects how our constructs relate to one
another.
In conclusion, the present paper has shown that explanatory concepts in the domain
of tax compliance which have traditionally been studied in different and somewhat
isolated research traditions have actually more in common than is often thought. Our
understanding of self-interest motives in tax compliance, here operationalized as outcome
favorability, is significantly enhanced by appreciating the role of distributive justice in
this process. By highlighting that distributive justice and outcome favorability strengthen
each others effect, the present findings may also explain inconsistencies in previous
research. . Finally, the applied implications is that tax authorities should focus on
promoting distributive justice as well as outcome favorability because both variables are
much less effective in isolation.

Tax Compliance

30

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Williams, K. R., & Hawkins, R. (1986). Perceptual research on general deterrence: a
critical review. Law and Society Review, 20, 545-572.

Tax Compliance

38

Notes
1. There were no major differences between the two data collection methods.
2. In study 1 the interaction between distributive justice and outcome favorability is
also significant without the control variables specified in the model.
3. To ensure that the distributive justice and outcome favourability scales actually
capture two distinct factors, we conducted CFA. We decided to compare the twofactor model with the one-factor model. CFA indicated insufficient fit for the onefactor model (see Browne et al., 1993): 2(20) = 104.17, p < .001; 2 / df = 5,21;
CFI = .87; IFI = .87; RMSEA = .11. The two-factor model showed a considerably
improved, and indeed satisfactory fit: 2(14) = 32.77, p < .01, 2 / df = 2.34;
RMSEA = .06; CFI = .97; IFI = .97.
4. In study 2 the interaction between distributive justice and outcome favorability is
also significant without the control variables specified in the model.
5. In an additional analysis with the Catreg procedure sanction severity appeared to
have a non ordinal relation with compliance. People indicating that sanctions were
not likely at all (first category) were closer to those who found sanction very
likely (seventh category). More research is necessary to clarify this observation.

Tax Compliance
Appendix
Study 1: Dutch Fiscal Monitor
Compliance (5) Some people pay less taxes because they do not
declare all of their income or they exaggerate
their deductions. This is called tax evasion,
which is illegal, of course.
- How acceptable do you find tax evasion of other
people
- Could you, under certain circumstances, decide
to evade paying tax
- How regrettable do you find: underreporting
your income
- How regrettable do you find: exaggerating
deductions
- If I had the possibility, I would evade paying tax

1= not acceptable at all,

5= completely acceptable
1= out of the question,
5= highly probable
1= very regrettable,
7= not regrettable
1= very regrettable,
7= not regrettable
1= completely disagree,
5= completely agree

Distributive
Justice (1)

- In my opinion the T.O. takes care that everyone

pays the right amount of tax

1= completely disagree,
5= completely agree

Outcome
favorability (2)

- Decisions of the T.O. are often favorable to me

- I usually agree with the decisions of the T.O.

1= completely disagree,
5= completely agree

Personal Norm
(1)

- I feel morally obliged to honestly declare all my 1= completely disagree,

tax liabilities
5= completely agree

Detection
Probability (3)

Sanction
Severity (4)

What do you think is the probability that the 1= very low,

T.O. finds out that income is not declared or 7= very high
deductions are exaggerated
What do you think is the probability that the
T.O. finds out that someone has received cash
payments
What do you think is the probability that the
T.O. finds out that someone uses fiscal
constructions to avoid paying tax

If the T.O. detects tax evasion, how likely do you

think are the following consequences?
-

paying the tax with a relatively small fine

paying a substantial fine
being audited in more detail the next years
criminal prosecution

1= very unlikely,
7= very likely

39

Tax Compliance

Study 2: Dutch Employees Survey

Compliance (3)

Suppose you received 500,- in cash payments for

some small job.
-

Distributive
Justice (5)

Outcome
favorability (3)

I would surely declare my cash payments to the

T.O.
Under certain circumstances I may choose not to
declare my cash payments
I feel like not declaring my cash payments
Compared to the tax I pay I receive too few public
provisions
Some groups in society profit more from the tax
system than I do
It is unfair that some people have to pay less taxes
than me but at the same time, take advantage of all
sorts of provisions
I think I have to pay too much tax
I think the Dutch tax system is fair
Decisions of the T.O. are often favorable to me
I am satisfied with the decisions of the T.O.
When I receive my tax liabilities, they are usually
worse than I expected

*
*
*
*
*
*

Personal Norm (1) - I feel morally obliged to pay all my taxes

Detection
Probability (3)

- The probability of being detected when evading tax

is low
- Someone who does not declare cash payments faces
a rather high probability of being detected
- The T.O. almost always finds out if someone has
deducted too much money.

Sanction Severity
(1)

- The punishment for tax evasion is rather severe

Answering format 1= completely disagree, 5= completely agree

* answering format has been reversed in order to compute the indexes by averaging the items.

Table 1
Descriptive statistics of the key variables in Fiscal Monitor Survey.

Max

Mean

SD

Compliance

3.72

0.88

Distributive Justice

4.31

1.58

Outcome Favorability

3.20

0.57

Probability to Detection

4.33

1.01

Sanction Severity

4.71

1.15

Personal tax Norm

4.21

0.81

DJ
0.08

OF
*

0.09

PD
*

0.22***

0.13

SS
***

0.11

PN
**

.38***

0.33***

0.08 *

.09*

0.11**

0.07

.15***

0.18 ***

.10**
.09*

40

Tax Compliance
*

: p < .05; ** : p < .01;

***

: p < .001.

Table 2.
Results of Hierarchical Regression Analysis of Outcome Favorability and Distributive Justice on
Compliance based on the Fiscal Monitor Survey (N=739).

Step 3

Step 4

Dependent Variable: compliance

Step 1
Sex
Age
Education
Household
Religion

**

.13
.12**
.09*
.00
.12**

Probability to Detection (PD)

Sanction Severity (SS)
SS x PD

Step 2
**

.12
.11**
.11**
.00
.12**

.12
.10**
.10**
.00
.12**

.09**
.07
.08*
.00
.10**

.11**
.10**
.05

.11*
.09*
.05

.08*
.07*
.04

.07
.00
.13***

.03
.00
.10**

Outcome Favorability (OF)

Distributive Justice (DJ)
OF x DJ

**

.33***

Personal Tax Norm

R2
R2change
R2adj
*

: p < .05; **: p < .01; ***: p < .001.

.05
.05**
.05

.08
.03***
.07

.10
.02**
.09

.20
.10***
.19

41

Tax Compliance

42

Table 3
Descriptive statistics of the key variables in Dutch Employees Survey.
Max

DJ

Compliance

2.71

0.67

Distributive Justice

2.39

0.67

Outcome Favorability

2.97

0.67

Probability to Detection

3.07

0.73

Sanction Severity

3.19

0.79

Personal tax Norm

3.10

1.09

: p < .05; ** : p < .01;

***

0.27

OF
***

0.18

PD
**

0.50***

SS

PN

0.03

.35***

-0.11*

-0.21 ***

.33***

-0.07

-0.13 *

.20**

0.21 ***

.12*

0.14

-.12*

: p < .001.

Table 4.
Results of Hierarchical Regression Analysis of Outcome Favorability and Distributive Justice on
Compliance based on the Dutch Employees Survey (N=357).

Dependent Variable: compliance

Sex
Age
Education
Household

Step 1

Step 2

Step 3

Step 4

.21**
.11**
-.05
-.08

.19**
.11*
-.03
-.08

.19*
.06
-.11*
-.10

.19**
.04
-.14**
-.09

.13*
-.05
-.02

.13*
.01
-.02

.08
.03
.03

.12*
.23***
.12*

.12*
.15*
.15**

Probability to Detection (PD)

Sanction Severity (SS)
SS x PD
Outcome Favorability (OF)
Distributive Justice (DJ)
OF x DJ

.29***

Personal Tax Norm

R2
R2change
R2adj
*

: p < .05; **: p < .01; ***: p < .001.

.04
.04**
.03

.06
.02
.04

.15
.09***
.12

.22
.07**
.19

Tax Compliance

43

Optimal scaling of education

scaled categories

3
study 1

study 2

1
0
-1
-2
1

education

Figure 1. Optimal scaling results of Education by Catreg procedure for both studies.

Figure 2. Simple slopes analyses of interaction between Distributive Justice and Outcome
Favorability based on Fiscal Monitor survey.

Tax Compliance

44

Figure 3. Simple slopes analyses of interaction between Distributive Justice and Outcome
Favorability based on Employees survey.