Tax evasion and mechanisms of social control: A comparison with grand and petty theft

Abstract

Schwartz and Orleans’ (1967) study of the deterrent effect of sanctions on tax evasion is considered one of the seminal studies in contemporary deterrence theory. In their field experiment, conducted in cooperation with the Internal Revenue Service, the authors compared the effectiveness of threats of legal sanctions and “appeals to conscience” in extracting compliance with taxpaying laws. While both strategies appeared to increase compliance, the appeal to conscience seemed more effective than the threat of legal sanctions. The present research incorporates advances in deterrence theory which have occurred since the early work by Schwartz and Orleans. While some theories of crime focus on factors which motivate individuals to violate the law, others, like deterrence theory, focus on factors which inhibit law violation. The present study draws on the mechanisms of social control, or inhibition, posited by deterrence theory to compare the deterrent effectiveness of three types of punishment threat for tax evasion and theft. The analysis utilizes survey data from a sample of 401 adult residents of a metropolitan area in the United States. Deterrence theory posits three mechanisms of social control, in the form of threatened punishments, which might inhibit illegal behavior: legal sanctions (state-imposed punishment), social stigma (peer-imposed punishment), and guilt feelings (self-imposed punishment). In a previous paper based on a different set of data, we report significant