Jeffery Sparks 
Researchers have uncovered evidence suggesting that individuals tend to misperceive their tax burden. The degree of this misperception depends on individual income levels.
Tax information determinants include both heuristics and individual moderators. For instance, individuals may perceive a decrease in monthly withholding taxes to stimulate spending more than a one-off payment would.
Studies of public disclosure on taxpayer compliance behavior were conducted using a full disclosure experiment, with results showing that disclosure can either increase or reduce psychological costs associated with tax evasion.
Behavioral Models
Contrary to classical economic theories that assume individuals act rationally and independently, behavioral tax behavior research posits that taxpayers’ decisions to comply or avoid taxes may not solely depend on an individual cost-benefit analysis. Instead, other considerations like whether their tax burden seems fair (tax affinity Djanali & Sheehan-Connor 2012 Citation2012), reference point dependency issues related to valuation differences for gains & losses (prospect theory Kahneman Tversky 1979 Citation), or personal/moral motivations can influence whether someone decides to pay their taxes or not.
Psychosocial determinants often have more of an effect than economic ones, including letters sent by tax agencies to increase awareness of audits and fines and use morality or social norms to persuade people into compliance. Yet this approach has its detractors as it often fails to distinguish between its overt effects on perceptions and behavior and any hidden psychological repercussions.
Prediction Models
Researchers have identified various demographic variables as key influences on taxpayer attitudes and behaviors. Marital status and education level have both been found to influence perceptions of compliance or tax evasion by taxpayers, along with perceived fairness of tax systems and trust in authorities; each of these influences plays a part in whether taxpayers comply with regulations on taxes.
Example: Legitimate power can facilitate reason-based trust and implicit trust while coercive power erodes them (Bijlsma-Frankema & Van de Bunt 2002; Das & Teng 1998).
Behavioral economics and cognitive psychology have identified multiple determinants of tax misperception. These include the use of simplifying decision heuristics, systematic perception and decision biases, as well as limited rationality. Furthermore, presentation format also plays a factor; for instance if the taxes are labeled “sales tax” instead of income tax they will likely be perceived more negatively (Blaufus et al. Citation 2013).
Models of Tax Evasion
At present, most research on tax evasion behavior has focused on individual taxpayers and their decision making processes. Models often utilize subjectively perceived detection probabilities and penalties rates as variables to better understand tax evasion motivations.
Other models have employed survey data to analyze taxpayer behavior. One such model, based on psychological egoism theory, suggests that individuals are driven by self-interest and will engage in tax evasion when it benefits them; furthermore, this explains why tax collection performance can be negatively impacted by seemingly small changes to tax rates as well as why epidemics of evasion often follow these changes.
Recent experimental methods research examined the relationship between risk-taking and tax evasion. Authors presented a hypothetical scenario whereby someone might agree to work for someone offering cash payments rather than official system compensation; over 50% of respondents indicated their willingness to engage in such behavior.
Models of Tax Compliance
Researchers have developed models of tax compliance which consider multiple factors, including risk of being Caught, fear of Penalties and Compliance Costs; social norms and trust in Government etc.
Studies utilizing the political legitimacy model demonstrate how citizens’ perceptions of fairness in government policies influence attitudes and behaviors toward those policies (Comunale et al. 2020). These perceptions are determined by principles such as distributive justice (distributive) and procedural justice (procedural).
Studies have demonstrated a correlation between taxpayers’ perceived fairness of tax systems and their level of knowledge (or ignorance), and perceived fairness; but this relationship may not always be seen as positive (Jemberie et al. 2020; Assfaw and Sebhat 2019). When considering this relationship between knowledge and perceived fairness in any country it is crucial to take account of cultural, social and economic circumstances influencing taxpayer perceptions and attitudes regarding its law; which can alter taxpayer responses making prediction challenging.
