ABSTRACT
Introduction Tax compliance has many facets. Tax evasion by wealthy people not declaring their capital incomes received in foreign tax heavens may nurture particular prejudices regarding what is involved, but is far from providing a comprehensive picture. Tax non-compliance also comprises the taxes evaded when individuals are working in the shadow economy; or tax avoidance by multinational firms becoming illegal when a (financial) court reaches a final verdict on particular tax saving schemes; or the sophisticated trading schemes which allow evasion of commodity taxes; or donations by family members to their supposed heirs to evade inheritance taxes; and so on. Tax compliance is, moreover, related to the broader concept of tax morale, which also includes the attitudes of honest taxpayers, who have never under-reported their true incomes, towards potential tax non-compliance by their dishonest fellow citizens. Is cheating on the tax code partly accepted as a minor disobedience, and which part of it is? Is tax non-compliance seen as undermining the functioning of a state in general? Or is it even accepted as a kind of popular gaming activity in which the state sometimes loses, sometimes wins? All these issues matter for tax compliance. In spite of the implied need to cope with tax non-compliance in a differentiated way, economic policy reactions to this complex phenomenon not infrequently appear to be uni-dimensionally focused on deterrence measures or incentives in general. For example, in Germany, just to give a flavor, the recent efforts comprise:
• increases in deterrence – for example, the so called “Black Activities’ Act” or, more exactly, the “Law to intensify the fight against black activities and accompanying tax evasion” (SchwarzArbG, Bundesrats-Drucksache 155/04a) in 2004, aiming at both raising fines and the intensity of control;
• measures to coordinate capital and corporate income taxation in the EU – for example, the European Savings Directive in 2005, which implements a (partial) system of information exchange, or the still ongoing negotiations regarding a Common Consolidated Corporate Income Tax Base;
• several measures to intensify auditing by increasing the transparency of monetary transactions between individual bank accounts that in sum almost abolish the German bank secrecy laws;
• tax rate reductions in the case of personal and corporate income taxation in 2000 and, in particular, as of 2008 onwards, including a new source tax on capital income and capital gains to be implemented in 2009;
• a tax amnesty in 2003.
