The Effects Of Exchange Equity On Tax Compliance

In recent years, the problem of tax evasion has widely concerned by the whole society. Thispaper aimed to study the problem by the method of experimental economics. We considered thatthe taxpayer’s decision-making process would be affected by perceived exchange equity. Therelationship between taxpayers and the government can be seen as a special kind of exchange;the taxpayers pay taxes to the government in order to purchase public goods and services, suchas social welfare, education, the maintenance of law and order, national defense. Therefore, thesatisfaction of a taxpayer on the government should play an important role in thedecision-making process, and this kind of satisfaction is called perceived exchange equity.In this paper, two behavioral experiments were designed to verify the effects of perceivedexchange equity. By comparing declared tax and tax compliance rate between subjects who hadpublic goods and ones who had no public goods, we obtained the following conclusions:perceived exchange equity will enhance the level of taxpayer compliance to some extent;subjects who perceived exchange equity as an important role will increase their level ofcompliance, when the government provided public goods with low efficiency, while subjectswho perceived exchange equity to be not important will not; two kinds of subjects will bothincrease their level of compliance when the government provided public goods with highefficiency.This paper can be deemed as a good supplement of existing research and has significantimplications for establishing mechanism to improve level of tax compliance in a country.