To read this content please select one of the options below:

Reference Points, Mental Accounting, and Taxpayer Compliance: Insights From a Field Study

aNiagara University, USA
bYork University, USA
cOld Dominion University, USA

Advances in Accounting Behavioral Research

ISBN: 978-1-80455-799-0, eISBN: 978-1-80455-798-3

Publication date: 13 March 2023

Abstract

We investigate how different cognitive conceptualizations of reference point and tax withholdings jointly influence aggressive tax filing. We utilize a field study with responses captured from actual taxpayers immediately after filing their returns. Consistent with both prospect theory and mental accounting perspectives, we hypothesize and find evidence that more aggressive filing decisions depend on mental categorization of whether taxpayers expect a tax refund or owe additional taxes relative to their expected asset position (EAP). We find a joint and additive impact of EAP with a cognitive link made between taxes and the categorization of amounts owed. Our findings suggest that more aggressive filing behavior is found in taxpayers in a tax loss position relative to their EAP and in those that do not separately categorize taxes owing from their own resources. By highlighting the importance of EAP and the cognitive separation of taxes owed, we provide insight for revenue agencies to use cognitive framing strategies to mitigate aggressive taxpayer behavior. The cognitive framing of EAP may be influenced by the use of installment payments and tax withholdings, but also may be affected by communications that alter taxpayers' expectations of taxes owed.

Keywords

Citation

Burt, I., Thorne, L. and Walker, J. (2023), "Reference Points, Mental Accounting, and Taxpayer Compliance: Insights From a Field Study", Karim, K.E. (Ed.) Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 26), Emerald Publishing Limited, Leeds, pp. 139-167. https://doi.org/10.1108/S1475-148820230000026006

Publisher

:

Emerald Publishing Limited

Copyright © 2023 by Emerald Publishing Limited