13:10 - 14:50
P8-S195
Room: -1.A.06
Chair/s:
Alfredo Hernandez Sanchez
Discussant/s:
Daniel E. Esser, Alfredo Hernandez Sanchez
Tax Defiance in the Era of Economic Inequality: Evidence from the United Kingdom
P8-S195-5
Presented by: Raphaëlle Soffe
Raphaëlle Soffe
Yale University
The “era of tax shaming”, 2012-13, saw a series of tax avoidance scandals hit mainstream media in the United Kingdom. My paper investigates the relationship between this media shock and British taxpayers’ willingness to engage in tax evasion. First, I find a statistically significant shift in perceptions that the tax system is unfair—a key determinant of tax compliance—in 2012 for both individuals and SMEs. Interestingly, firms also update their perceptions of audit rates, becoming less likely to expect prosecutions for tax evasion. Second, I find that taxpayers become less accepting of tax non-compliance through “legal loopholes” while becoming more accepting of small-scale tax evasion. Finally, I present evidence of significant and unexplained shifts in the real tax evasion behavior of self-employed individuals and small firms in the years following the tax avoidance scandals. In short, my paper proposes a new political outcome of “tax defiance” in the era of economic equality, where protest happens through the pocketbook rather than the ballot box.
Keywords: Taxation, inequality, fairness, protest, firms

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