Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-30T19:23:33.807Z Has data issue: false hasContentIssue false
  • English
  • Français

When Do We Think About Detection? Structural Opportunity and Taxpaying Behavior

Published online by Cambridge University Press:  27 December 2018

Loretta J. Stalans ,
Kent W. Smith  and
Karyl A. Kinsey
Get access Rights & Permissions [Opens in a new window]

Abstract

Past studies have generally found that perceptions of the likelihood of formal and informal sanctions have lower explanatory power of noncompliance with laws than do internalized norms. Using data from two telephone surveys, we examined a situational characteristic, structural opportunity, that may prod individuals to think about the likelihood of detection from the Internal Revenue Service for underreporting income. Structural opportunity is the degree to which an individual's economic or social situation provides ways to avoid detection. Individuals with high structural opportunity perceived a lower likelihood of IRS detection and indicated that they were less likely to feel guilty if they engaged in tax cheating. Our data also suggested that some individuals with high structural opportunity may be in social networks which condone tax cheating. As expected, structural opportunity provided a condition under which individuals took into consideration the perceived likelihood of formal and informal detection in formulating intentions to engage in tax cheating. Our findings suggest that an examination of the interaction between situational and individual characteristics will provide a more complete understanding of decisions to engage in illegal behavior. Implications for deterrence theory are discussed.

Type
Articles
Information
Law & Social Inquiry , Volume 14 , Issue 3 , Summer 1989 , pp. 481 - 503
Copyright
Copyright © American Bar Foundation, 1989 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Smith, K. W. & Kinsey, K. A., “Understanding Taxpaying Behavior: A Conceptual Framework with Implications for Research,” 21 Law & Society Review 639 (1987).CrossRefGoogle Scholar

2 Carroll, J. S., “Compliance with the Law: A Decision-making Approach to Taxpaying,” 11 Law & Hum. Behav. 319, 328 (1987).Google Scholar

3 Hogarth, R. M., “Beyond Discrete Biases: Functional and Dysfunctional Aspects of Judgmental Heuristics,” 90 Psychological Bull. 197 (1981).CrossRefGoogle Scholar

4 Bishop, D. M., “Legal and Extralegal Barriers to Delinquency,” 22 Criminology 403 (1984); Erickson, M. L. & Gibbs, J. P., “Objective and Perceptual Properties of Legal Punishments,” 25 Soc. Probs. 253 (1978); Grasmick, H. G. & Green, D. E., “Legal Punishment, Social Disapproval and Internalization as Inhibitors of Illegal Behavior,” 71 J. Crim. L. & Criminology 325 (1980); Jensen, G. F., “Crime Doesn't Pay: Correlates of a Shared Misunderstanding,” 17 Soc. Probs. 189 (1969); Lanzu-Kaduce, L., “Perceptual Deterrence and Drinking Among College Students,” 26 Criminology 321 (1988); Paternoster, R., Saltzman, L. E., Chiricos, T. G., & Waldo, G. P., “Estimating Perceptual Stability and Deterrent Effects: The Role of Perceived Legal Punishment in the Inhibition of Criminal Involvement,” 74 J. Crim. L. & Criminology 270 (1983).Google Scholar

5 Bishop, 22 Criminology at 403; Jensen, 17 Soc. Probs. at 189.CrossRefGoogle Scholar

6 Scott, W. J. & Grasmick, H. G., “Deterrence and Income Tax Cheating: Testing Interaction Hypotheses in Utilitarian Theories,” 19 J. Applied Behav. Sci. 395 (1981).CrossRefGoogle Scholar

7 Cloward, R. and Ohlin, L., Delinquency and Opportunity (New York: Macmillan, 1960).Google Scholar

8 Cohen, L. E., Felson, M., & Land, K. C., “Property Crime Rates in the United States: A Macrodynamic Analysis 1947–77. With Exante Forecasts for the Mid-1980s,” 86 Am. J. Sociology 90 (1980); Cohen, L. E. & Machelck, R., “A General Theory of Expropriative Crime: An Evolutionary Ecological Approach,” 94 Am. J. Sociology 465 (1988).Google Scholar

9 See, e. g., Smigel, E. O. & Ross, L. H., Crimes Against Bureaucracy (Chicago: Litton Educational Publishing, 1970); Vaughan, D., Controlling Unlawful Organizational Behavior: Social Structure and Corporate Misconduct (Chicago: University of Chicago Press, 1983).Google Scholar

10 Smith & Kinsey, 21 Law & Soc'y Rev. at 639.Google Scholar

11 Klepper, S. & Nagin, D., “The Anatomy of Tax Evasion,” 5 J. L. Econ., & Organizations, forthcoming (1989); Smith, & Kinsey, , 21 Law & Soc'y Rev. at 639.Google Scholar

12 Aitken, S. & Bonneville, L., “A General Taxpayer Opinion Survey,” prepared by CSR, Inc. (Washington, D. C.: Office of Planning and Research, Internal Revenue Service, 1980) (“Aitken & Bonneville, ‘Survey’”); Groenland, E. A. G. & van Veldhoven, G. M., “Tax Evasion Behavior: A Psychological Framework,” 1 J. Econ. Psychology 49 (1983); Vogel, J., “Taxation and Public Opinion in Sweden,” 27 Nat'l Tax J. 499 (1974).Google Scholar

13 See, e. g., Lempert, R., “Organizing for Deterrence: Lessons From a Study of Child Support,” 16 Law & Soc'y Rev. 513 (1982).CrossRefGoogle Scholar

14 Aitken & Bonneville, “Survey” (cited in note 12); Yankelovich, Skelly, & White, Inc., “Taxpayer Attitudes Survey: Final Report” (Washington, D. C.: Internal Revenue Service, 1984); Louis Harris & Associates, Inc., “Taxpayer Survey” (Washington, D. C.: Internal Revenue Service, 1987).Google Scholar

15 Walker, N. & Hough, M., Public Attitudes to Sentencing: Surveys from Five Countries (Brookfield, Vt: Gower Publishing Co., 1988).Google Scholar

16 See, e. g., Grasmick & Green, 71 J. Crim. L. & Criminology at 325 (cited in note 4); Grasmick, H. G. & Appleton, L., “Legal Punishment and Social Stigma: A Comparison of Two Deterrence Models,” 58 Soc. Sci. Q. 15 (1977).Google Scholar

17 Kinsey, K. A., “Theories and Models of Tax Evasion,” 18 Crim. Just. Abstracts 403 (1986).Google Scholar

18 Long, S. B. & Swingen, J. A., “The Impact of Legal Complexity and Opportunity on Taxpayer Compliance” (presented at the Frank M. Malanga Memorial Research Conference, “Change and Complexity as Barriers to Taxpayer Compliance,” sponsored by the IRS, Washington, D. C., November 1988).Google Scholar

19 Festinger, L., “A Theory of Social Comparison Processes,” 7 Hum. Relations 117 (1954).CrossRefGoogle Scholar

20 Stalans, L. J., Smith, K. W., & Kinsey, K. A., “The Formation of Sanction Perceptions and Tax Cheating: A Communication Model” (presented at Law and Society Association Annual Meeting, Madison, Wis., June 1989) (“Stalans et al.”).Google Scholar

21 Kagan, R. A., “On the Visibility of Income Tax Violations,”in Roth, J. A. & Scholz, J. T., eds., 2 Taxpayer Compliance: Social Science Perspectives (Philadelphia: University of Pennsylvania Press, 1989).CrossRefGoogle Scholar

22 Ekland-Olson, S., Lieb, J., & Zurcher, L., “The Paradoxical Impact of Criminal Sanctions: Some Microstructural Findings,” 18 Law & Soc'y Rev. 159 (1984).CrossRefGoogle Scholar

23 See, e. g., Smith, & Kinsey, , 21 Law & Soc'y Rev. at 639 (cited in note 1).Google Scholar

24 See, e. g., Nisbett, R., “Public Opinion Versus Popular Opinion,” 41 Public Interest 166 (1975).Google Scholar

25 Stalans, L. J. et al. (cited in note 20).Google Scholar

26 See, e. g., Carroll, 11 Law & Hum. Behav. at 319 (cited in note 2).Google Scholar

27 See, e. g., Fiske, S. T. & Taylor, S. E., Social Cognition (Reading, Mass.: Addison Wesley, 1984); Tesser, A. & Leone, C., “Cognitive Schemas and Thought as Determinants of Attitude Change,” 13 J. of Experimental Soc. Psychology 340 (1977).Google Scholar

28 Mason, R., Boersma, L., & Faulkenberry, D. G., “The Use of Open and Close Questions to Identify Holders of Crystallized Attitudes: The Case of Adoption of Erosion Control Practices Among Farmers,” 53 Rural Sociological Soc'y 96–109 (1987).Google Scholar

29 Taylor, S. E., “The Availability Bias in Social Perception and Interaction,”in Kahneman, D., P. Slovic, & A. Tversky, eds., Judgment Under Uncertainty: Heuristics and Biases 190, 197 (New York: Cambridge University Press, 1982).CrossRefGoogle Scholar

30 Carroll, J. S., “A Psychological Approach to Deterrence: The Evaluation of Crime Opportunities,” 36 J. Personality & Soc. Psychology 1512 (1978).CrossRefGoogle Scholar

31 Weaver, F. M. & Carroll, J. S., “Crime Perceptions in a Natural Setting by Expert and Novice Shoplifters,” 48 Soc. Psychology Quarterly 349 (1985).CrossRefGoogle Scholar

32 Scott & Grasmick, 17 J. Applied Behav. Sci. at 395 (cited in note 6).CrossRefGoogle Scholar

33 A complete description of the measures and analysis of the Minnesota 1985 data can be obtained from the authors upon request.Google Scholar

34 Datum for income level was missing for 7.8% of the respondents. A regression using six factors explained 42.5% of the variance in the natural log of income. For those missing datum on income level, income level was substituted using the following equation: Log of Income = 33.752 + 0.013∗ age squared − 0.372∗ whether paying off mortgage + 0.07∗ education level + 0.05∗ number of financial dependents + 0.12∗ whether respondent was full-time or part-time + 0.12∗ whether respondent's spouse works full-time or part-time. The reported results, including the respondents who had income level substituted, did not differ from the results using only those respondents who had complete data for all variables including income level.Google Scholar

35 Internal Revenue Service, Package X: Informational Copies of Federal Tax Forms, 1985 (Washington, D. C.: Government Printing Office, 1985).Google Scholar

36 A 2 × 2 analysis of covariance with sources of income other than cash or barter income not subject to full reporting (0 = none, 1 = at least one source) and medium of exchange (0 = have not received cash or goods or services, 1 = have received cash or goods or services) on intentions to underreport income revealed two strong main effects for both medium of exchange and sources of income, ps < 0.0001. The interaction was not significant (p < 0.18). These results suggest that these measures of structural opportunity combine additively to affect intentions to underreport income which supports the approach taken in constructing the present scale of structural opportunity.Google Scholar

37 See, e. g., Grasmick & Green, 71 J. Crim. L. & Criminology at 325 (cited in note 4).CrossRefGoogle Scholar

38 Geerken, M. & Gove, W. R., “Deterrence: Some Theoretical Considerations,” 9 Law & Soc'y Rev. 497 (1975).CrossRefGoogle Scholar

39 Grasmick & Green, 71 J. Crim. L. & Criminology at 325 (cited in note 4); Grasmick & Appleton, 58 Soc. Sci. Q. at 15 (cited in note 16).Google Scholar

40 Grasmick & Green, 71 J. Crim. L. & Criminology at 325 (cited in note 4); Grasmick, H. G. & Scott, W. J., “Tax Evasion and Mechanisms of Social Control: A Comparison with Grand and Petty Theft,” 2 J. Econ. Psychology 213 (1982).CrossRefGoogle Scholar

41 Smith & Kinsey 21 Law & Soc'y Rev. at 639 (cited in note 1).Google Scholar

42 See, e. g., Vallacher, R. R. & Wegner, D. M., “What Do People Think They're Doing? Action Identification and Human Behavior,” 94 Psychological Rev. 3 (1987).CrossRefGoogle Scholar

43 Carroll, 11 Law & Hum. Behav. at 319 (cited in note 2).Google Scholar

44 See, e. g., Scott & Grasmick, 17 J. Applied Behav. Sci. at 395 (cited in note 6).Google Scholar

45 Weaver & Carroll, 48 Soc. Psychology Q. at 349 (cited in note 31).Google Scholar

46 Bishop, 22 Criminology at 403 (cited in note 4); Erickson & Gibbs, 25 Soc. Probs. at 253 (cited in note 4); Grasmick & Green, 71 J. Crim. L. & Criminology at 325 (cited in note 4); Jensen, 17 Soc. Probs. at 189 (cited in note 4); but see Paternoster et al., 74 J. Crim. L. & Criminology at 270 (cited in note 4).Google Scholar

47 For a review see Williams, K. R. & Hawkins, R., “Perceptual Research on General Deterrence: A Critical Review,” 20 Law & Soc'y Rev. 545 (1986).Google Scholar

48 We did not test whether structural opportunity specified the relationship between demographic variables and future intentions because demographic variables represent crude proxies for both situational characteristics and psychological processes. Moreover, the increase in the number of interaction terms may have created problems of multicollinearity.Google Scholar

49 The standard errors of the coefficients for the medium and high opportunity groups were computed from the variances and covariances of the estimates of the coefficients.Google Scholar

50 We also conducted a maximum-likelihood logit analysis to determine the extent to which the findings held when the dependent variable was dichotomized. A logistic analysis is often used with dichotomous dependent variables because it makes fewer assumptions about the distributions of the error terms and produced unbiased estimates for models of the factors affecting dichotomous variables. See, for example, E. A. Hanushek & J. E. Jackson, Statistical Methods for Social Scientists 179–216 (Orlando, Fla.: Academic Press, 1977). The power of logit analysis, however, decreases as the distribution deviates from 50/50.Google Scholar

We collapsed the likelihood of underreporting into two categories: 1 = very unlikely; 2 = very likely, somewhat likely, and somewhat unlikely. This collapsing was chosen for two reasons. First, individuals who indicate a response other than very unlikely perceive some possibility of engaging in tax cheating; and, second, this collapsing gave a 78 (very unlikely) to 22 (other) split for reasonable power in the estimation. The signs of all the coefficient estimates in the logit analysis were the same as in the corresponding OLS regression, although fewer were statistically significant. In the logit analysis, the perceived likelihood of others finding out and the perceived likelihood of IRS detection had significant effects for only the high structural opportunity group. The three opportunity levels did not differ on the effects of the perceived likelihood of feeling guilty.Google Scholar

51 Scott & Grasmick, 17 J. Applied Behav. Sci. at 395 (cited in note 6).Google Scholar

52 Weaver & Carroll, 48 Soc. Psychology Q. at 349 (cited in note 31).Google Scholar

53 See, e. g., Vallacher & Wegner, 94 Psychological Rev. at 3 (cited in note 42).CrossRefGoogle Scholar