Tax Amnesties: Trends and Implication for Taxpayers’ Compliance. A Literature Review

Abstract

The focus of this paper is to conduct a literature review on tax amnesties and the factors which are necessary for its effective implementation for compliance. The study employed a library based research design which involves desk-review of extant literature. The literature review shows much research attention given to the issue, though the findings are mixed and quite inconclusive. The review also brings up a few issues which are seen as probable weaknesses or inconsistencies in tax amnesty research looking from a tax compliance perspective. First, while there is evidence regarding success of tax amnesties in the developed world, empirical proof on the progress made in developing countries are scarce. Second, although the concept of tax amnesty has been extensively examined in the tax literature, only a few studies have used an experimental approach to examine the long run effect of tax amnesty on voluntary tax compliance. Third, there is still no clear unanimity in the literature regarding how social and psychological factors such as political trust, political will, perceived corruption, and perceptions of justice and punishment objectives influence the implementation of tax amnesties. Finally, the study observes that in tax amnesty research there is always the tendency for majority of prior studies to assume homogeneity in level of compliance whereas significant differences may exist in the degree of compliance between high and low income earners. The study therefore concludes that there is the need for future empirical studies to address these weaknesses and inconsistencies.