A NEW PERSPECTIVE ON INDIVIDUAL TAX COMPLIANCE: THE ROLE OF THE INCOME SOURCE, AUDIT PROBABILITY AND THE CHANCE OF BEING DETECTED

Abstract

Individual tax compliance remains an important area of research and still gives many directions that can be followed by economists in their constant struggle to understand the puzzle of taxpayer behaviour. The aim of this article is to offer a new approach regarding individual tax compliance and self-reporting behaviour, through a quasi-experiment with 102 students from three different professional areas: medicine, law and accountancy, which took place in Iaşi, Romania. The main results found highlight the importance and the role played by the income source, audit probability and the perceived chance of being detected. Potential taxpayers report less income when there is no evidence on paper for its existence and when the audit probability is low. As the perceived chance of being audited rises, the amount of reported income also rises. The perceived chance of being detected also rises simultaneously with the audit probability. The results are useful to both theorists and practitioners, but also to policy makers.