Tax Misperception and Its Effects on Decision Making – a Literature Review

Kay Blaufus, Malte Chirvi, Hans-Peter Huber, Ralf Maiterth, Caren Sureth-Sloane

Publication: Working/Discussion PaperWU Working Paper

Abstract

Previous accounting research shows that taxes affect decision making by individuals and firms. Most studies assume that agents have accurate perception regarding their tax burden. However, there is a growing body of literature analyzing whether taxes are indeed perceived correctly. We review 124 studies on the measurement of tax misperception and its behavioral implications. The review reveals that many taxpayers have substantial tax misperceptions that lead to biased decision making. We develop a Behavioral Taxpayer Response Model on the impact of provided tax information on tax perception. Besides individual traits, characteristics of the tax information and the decision environment determine the extent of tax misperception. We discuss opportunities for future research and methodological limitations. While there is much evidence on tax misperception at the individual level, we hardly find any research at the firm level. Little is known about the real effects of managers’ tax misperception and on how tax information is strategically managed to impact stakeholders. This research gap is surprising as a large part of the accounting literature analyzes decision making and disclosure of firms. We recommend a mixed-method approach combining experiments, surveys, and archival data analyses to improve the knowledge on tax misperception and its consequences.
Original languageGerman (Austria)
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Publication statusPublished - 1 Nov 2020

Publication series

NameWU International Taxation Research Paper Series
No.2020-13

WU Working Paper Series

  • WU International Taxation Research Paper Series

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