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The Influence of Goal Conflict and Information Asymmetry on Individuals’ Tax Evasion Judgments
Diana Falsetta, University of Miami
Jennifer B Kahle, University of South Florida
George T Tsakumis, Drexel University
ABSTRACT. Experimental principal-agent studies focus primarily on the corporate manager-firm relationship. However, there exists a principal-agent relationship between the tax-collecting agency and the taxpayer that has not previously been experimentally examined. Two agency theory concepts (goal conflict and information asymmetry) are used to provide a theoretical explanation for individuals’ tax evasion judgments. Tax protestors and tax resisters represent some of the taxpayers who have extreme goal conflict with the government. While information asymmetry is somewhat controlled through reporting documents (e.g. W-2s), we also view the IRS audit rate as a way to reduce information asymmetry and taxpayer’s private information. Results indicate taxpayers are significantly more likely to report self-employment income on their tax returns when there is both low goal conflict and low information asymmetry.
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