Machiavellianism, social norms, and taxpayer compliance

• Author: Zhihong Wang,William E. Shafer
• Date: 01 January 2018
• DOI: http://doi.org/10.1111/beer.12166
• Published date: 01 January 2018

ORIGINAL ARTICLE

Machiavellianism, social norms, and taxpayer compliance

William E. Shafer

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Zhihong Wang

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1

Department of Accountancy, 8 Castle Peak

Road, Lingnan University, Tuen Mun, NT,

Hong Kong

2

Graduate School of Management, Clark

University, 950 Main St., Worcester,

Massachusetts 01610, USA

Correspondence

William Shafer, Department of

Accountancy, 8 Castle Peak Road, Lingnan

University, Tuen Mun, NT, Hong Kong.

Email: weshafer@ln.edu.hk

This study is the first to examine the relationshipsamong Machiavellianism, social norms andtax-

payer intentionsto fraudulently overstate their deductions. We theorizeand empirically document

that (a) high Machiavellian taxpayers report significantly less ethical social norms, suggesting that

reported social norms are influenced by cognitive biases such as social projection and Machiavel-

lian cynicism; (b) reported social norms are, in general, significantly associated with tax evasion

intentions; (c) social norms partially mediate the relationship between Machiavellianism and eva-

sion intentions. Our findings imply that experimental research that controls for key personality

traits such as Machiavellianism will be necessary to test the effectiveness of potential interven-

tions designed to enhance social norms and tax compliance. Our findings also raise questions

regarding the validity of certain social norm measures used in recent studies, particularly in the

case of high Machiavellians. In contrast to much prior research, gender was not associated with

the likelihood ofcommitting tax fraud in our multivariate models, suggesting that the higherlevels

of tax complianceoften associated with females maybe eroding.

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INTRODUCTION

Taxpayer compliance has presenteda major public policyissue in juris-

dictions worldwide for many years. Not surprisingly, there has been a

great deal of empiricalresearch on this issue (for reviews see Andreoni,

Erard, & Feinstein, 1998; Jackson & Milliron, 1986). Most early

research on taxpayer compliance focused primarily on economic varia-

bles such as the perceived likelihood of audits and penalty rates (e.g.,

Andreoni et al., 1998; Reinganum & Wilde, 1985; Trivedi, Shehata, &

Lynn, 2003; Witte& Woodbury, 1985).However, as researchers came

to realize that economic variables alone cannot provide satisfactory

explanations of decisions to evade taxes, they increasingly turned to

social psychological influences to help explain such behavior

(Blanthorne & Kaplan, 2008; Brizi, Giacomantonio, Schumpe, &

Manetti, 2015; Sidani, Ghanem, & Rawwas, 2014).

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As observed by

Sidani et al.(2014), among other limitations economic models could not

explain why tax compliance rates were relatively high even in jurisdic-

tions wherethe risk of being audited anddetected was very low. Sidani

et al. (2014, p. 184, emphasis added) further note that “Like any other

action of moral significance, people act because of certain attitudes

they have, values to which they adhere, beliefs that they embrace, and

social norms with which theyfeel more or less pressured to comply.”

In recent years, a popular trend has beento investigate the poten-

tial effects of thesocial norms (e.g., general societalexpectations) refer-

enced by Sidani et al. (2014) on taxpayers’compliance decisions

(Bobek, Hageman, & Kelliher, 2013; Bobek & Hatfield, 2003; Davis,

Hecht, & Perkins, 2003; Wenzel, 2004, 2005). Based on findings that

reported social norms influence such decisions, researchers have sug-

gested that regulatory authorities should invest more resources in

taxpayer educationthrough approaches such as media campaignsin an

effort to shiftsocial norms in favor of tax compliance.

However, these studies have not adequately recognized the

potential influence of fundamentalpersonality traits such as Machiavel-

lianism on taxpayers’reported social norms,or the implications of such

influences. Although Machiavellianism is a widely recognized personal-

ity trait with documented associations with unethicaland dysfunctional

behaviors across the social sciences, it has received relatively little

attention in thetax compliance literature. We introduce the Machiavel-

lianism construct to the study of the social norm/tax compliance link

and demonstratethat it has fundamental implications for this link.

We argue herein that taxpayer reports of perceived social norms

are not likely to be objective, but will reflect biases such as socialpro-

jection, moral cynicism, and motivated cognition. High Machiavellians

should be particularly prone to biases suchas moral cynicism and moti-

vated social cognition; consequently, Machiavellian tendencies should

be associated with both reported social norms and tax evasion inten-

tions. Specifically, we argue that due to cognitive biases, high

Machiavellians will perceive social norms in a more negative light, and

that such negative perceptions will in turn be associated with higher

levels of tax evasion intentions. Due to its robust association with ethi-

cal decision makingacross many domains, Machiavellianism should also

be directly associated with evasion intentions. Our empirical findings,

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C2017 JohnWiley & Sons Ltd wileyonlinelibrary.com/journal/beer BusinessEthics: A Eur Rev. 2018;27:42–55.

Received:23 October 2016

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Revised: 25 July 2017

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Accepted:29 July 2017

DOI: 10.1111/beer.12166