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Economic and Non-Economic Factors: An Analysis of Corporate Tax Compliance

Advances in Taxation

ISBN: 978-1-78441-120-6, eISBN: 978-1-78441-119-0

Publication date: 18 November 2014



This chapter applies an “integrative” model to examine the impact and interaction of economic and moral/social factors in the corporate tax compliance context. More specifically, it examines whether social norms moderate the effect of economic factors in this context.


Fifty-five MBA students assumed corporate CFO roles and analyzed a proposed aggressive corporate tax shelter transaction (“tax shelter”). Participants indicated whether they would recommend the tax shelter and answered questions regarding the transaction and their corporate tax compliance views.


Hierarchical Regression results indicate that, in the corporate tax compliance context, decision makers’ norms (moral/social factors) moderate the effect of perceived expected value of aggressive tax transactions (economic factors). More specifically, results indicate that (1) perceived legality of aggressive corporate tax transactions significantly impacts willingness of corporate decision makers to recommend them, even when controlling for perceived economic effect of the transaction, and (2) due to moral/social factors, corporate decision makers often may not support aggressive tax treatments with material positive expected values.

Practical implications

Accordingly, (1) custom and social factors should be integrated into the corporate tax compliance decision-making framework, and (2) campaigns to strengthen corporate tax compliance should focus on the law’s text and intent as well as upon sanctions for noncompliance.




The authors wish to thank Andy Cuccia for assistance with experiment and instrument design and Yong-Mi Kim for assistance with data analysis. The authors also wish to thank Editor Toby Stock and the two anonymous reviewers for their insightful comments and input.


Downs, A. and Stetson, B. (2014), "Economic and Non-Economic Factors: An Analysis of Corporate Tax Compliance", Advances in Taxation (Advances in Taxation, Vol. 21), Emerald Group Publishing Limited, Leeds, pp. 37-72.



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