Effects of Shaming Tax Evaders on Perceptions of Retributive Justice and Tax Compliance Intentions

Cheating on taxes is a global problem that reduces funding for social security and infrastructure, and exacerbates unequitable distribution of the tax burden. Many tax authorities in the Organization for Economic Co-operation and Development (OECD) and other countries have used naming-and-shaming (shaming) to enforce tax compliance.

Shaming includes publicizing tax offenders, their offenses and punishments to deter tax evasion. For example, the Canada Revenue Agency (CRA) publicizes convictions for tax offenses involving fraud and failure to file tax returns, and the tax authority in Ireland publishes a list of tax offenders including their addresses in the country’s official newspaper of record - Iris Oifigiuil. However, we do not know the efficacy of shaming tax evaders.

This study examines the effects of shaming tax evaders on third-party observers’ perceptions of retributive justice (appropriateness of tax evader punishments) and tax compliance intentions. It also examines whether the effects of shaming depend on how the tax authority persuades observers.

The findings show that shaming tax evaders increases third-party observers’ tax compliance intentions. Furthermore, this study finds that high quality persuasion increases observers’ tax compliance intentions, and that persuasion is a viable alternative to shaming. The results of this study also suggest that shaming has a positive effect on perceptions of retributive justice.

Importantly, the findings reveal that the perceptions of retributive justice influence the effects of shaming on tax compliance intentions for third-party observers. In summary, third-party observers perceive shaming as an appropriate punishment for tax evaders and the observers are more likely to pay their taxes when the tax authority shames tax evaders. This study offers suggestions on how the tax authority could use shaming and persuasion to increase tax compliance.
Citation: Okafor, O., (accepted). Shaming of Tax Evaders: Empirical Evidence on Perceptions of Retributive Justice and Tax Compliance Intentions. Journal of Business Ethics.