Collusive vs. coercively corrupt tax auditors and their impact on tax compliance

This study examines taxpayer compliance in the presence and absence of collusively corrupt taxauditors and compares it to taxpayer compliance in the presence and absence of coercively corrupt tax auditors. Our experimental results show that overall taxpayer compliance declines in the presence of a collusively corrupt tax auditor who accepts bribes that leave the taxpayer economically better off. In contrast, taxpayer compliance increases in the presence of coercive tax auditors who demand moderate bribes. This may reflect taxpayers’ attempt to create a moral distance between themselves and the corrupt auditor. However, such economic sacrifices disappear when the level of bribe demanded by coercive auditors is increased to a higher component of reported income, suggesting that taxpayers may be willing to bear only relatively modest costs to morally differentiate themselves from coercive tax auditors