ABSTRACT
Responsive regulation is particularly successful and significantly more frequently employed in direct democratic cantons. In that respect, traditional deterrence policy is rather delicate, because the tax office can mistakenly forego to audit tax cheaters. A too strong emphasis on deterrence would accordingly lead to a distrust of citizens and finally crowd out tax morale. Because the traditional economic approach to tax evasion does not appear to be successful in explaining tax compliance and since reciprocity norms that establish an exchange relationship between the state and the citizens shape tax morale, a case study of Switzerland appears to be particularly useful. In addition, the size of the shadow economy is less than half the extent of tax evasion. Since the preferred estimates of Schneider are based on the currency demand approach it can be argued that it captures labor income to a larger extent than capital income.
