Tax and Trust

1 Introduction to Tax and Trust 17
Sjoerd Goslinga, Lisette van der Hel-van Dijk, Peter Mascini and Albert van Steenbergen
1.1 Introduction 17
1.2 A Brief Look at Literature on Tax and Trust 20
1.2.1 Consequences of Trust 21
1.2.2 Determinants of Trust 23
1.3 Conclusion 24
1.4 Brief Description of the Chapters in This Volume 24

2 Trust and Control 31
Bart Nooteboom
2.1 Introduction 31
2.2 Competence, Intentions and Openness 33
2.3 Levels of Trust 34
2.4 Reliance and Trust 35
2.5 Governance 36
2.6 Diagnostic and Design of Trust 38
2.7 Openness and Uncertainty 39
2.8 The Trust Process 39
2.9 Horizontal Control 41
2.10 Conclusions 42

3 Trustworthy Institutions: A Cognitive Theory of Tax Morale 45
Sven Steinmo
3.1 Introduction 46
3.2 Norms 48
3.2.1 Cognitive Consistency – The Mind as a Theory-Building Machine 50
3.3 Institutions → Norms → Behaviour → Trust 52
3.4 Tax Morale, Culture and Political Institutions 56
3.5 Conclusion and Some Implications 58

4 Trust and Tax Principles: A Dutch Case Study 63
Sonja Dusarduijn
4.1 Introduction and Outline 63
4.2 The Importance of Being Trustworthy 64
4.2.1 The Concept of Trust 64
4.2.2 Trust in State Institutions: Competence and Values 66
4.2.3 Trust in the Domain of Tax Regulation 67
4.2.4 Three Fundamental Principles in Tax Legislation 70
4.2.5 An Example of the Downside of Haste 71
4.2.6 Erosion of Trust 73
4.3 The Principle of Equality 75
4.3.1 Scope and Content of the Principle of Equality 75
4.3.2 An Example: Legal Fictions in Tax Law 77
4.3.3 A Robust Fiction in Box 3 78
4.3.4 Equal Treatment of the Unequal 79
4.3.5 Lack of Clarity 81
4.4 Conclusion 82

5 The Slippery Slope Framework of Tax Behaviour: Reviewed and Revised 87
Janina Enachescu and Erich Kirchler
5.1 The Beginning of the SSF 87
5.2 The Components of the SSF 89
5.2.1 The Extension of the SSF 91
5.3 Empirical Evidence for the SSF 94
5.4 Conclusion from the Empirical Evidence 112
5.4.1 Future Research 115
5.5 Practical Implications 116

6 Restoring Trust in the ‘Fairness’ of Corporate Taxation: Increased Transparency and the Need for Institutional Reform 121
Judith Freedman
6.1 Introduction 122
6.2 Part I: Corporate Tax and Lost Trust 122
6.3 Part II: Trust and Transparency 126
6.4 Part III: Was There Ever Trust? 131
6.5 Part IV: Building Relationships to Restore Trust 132
6.6 Part V: Conclusions – Improving Public Trust 138
14 Tax and Trust

7 Tax Officials’ Image of Taxpayers and Rule-Bending Behaviours 143
Steven Vande Walle and Shelena Keulemans
7.1 Introduction 143
7.2 Without Anger or Fondness 144
7.2.1 Bending the Rules to Help Clients? 145
7.2.2 Do Officials Actually Want to Help Their Clients? 145
7.3 How New Recruits Change: Learning the Ropes as Newcomers 146
7.3.1 How Rule Orientation Changes: Rules Are Rules? 147
7.3.2 How Pro-social Client Attitudes Change: Administrative Compassion Versus the Reality Shock 147
7.4 Tax Officials as Street-Level Bureaucrats 148
7.5 Trusting Taxpayers? 148
7.6 Data 149
7.7 Findings 149
7.8 Conclusion 157

8 Three Design Principles for the Future of Tax Authorities: Modular, Agile and Decentral 161
Sander Klous and Nart Wielaard
8.1 The Attractive Prospect of a Data-Driven Tax Authority 161
8.2 Digital Transformations: Dealing with Complexity 163
8.2.1 Internet 163
8.2.2 Fred Brooks 164
8.3 The Growing Influence of Algorithms 165
8.4 A Model for Oversight on Data Analysis 167
8.4.1 Professionalized Approach 167
8.4.2 Agile Approach 168
8.4.3 Modular Approach 168
8.4.3.1 Cyber Security 168
8.4.3.2 IT Architecture and Control 168
8.4.3.3 (Data) Governance 168
8.4.3.4 Algorithm Reliability 169
8.4.3.5 Ethics 169
8.4.4 Decentralized Approach 170
8.5 Conclusion 171

9 Beyond the Access-Use Debate: Regulating the Analysis of Information in the Big Data Era in Order to Ensure Reliability and Trustworthiness 175
Bart van der Sloot
9.1 Introduction 175
9.2 Big Data 177
9.3 Access-Use Debate 181
9.4 The Analysis of Data 188
9.5 Building Blocks 194
9.6 Conclusion 202

10 Legal Aspects of Behaviourally Informed Strategies to Enhance Tax Compliance 209
Koos Boer and Hans Gribnau
10.1 Introduction 209
10.2 Behaviourally Informed Strategies and Tax Administration 211
10.2.1 Behavioural Insights and Compliance Approach 211
10.2.2 Concept of ‘Tax Nudging’ 212
10.2.3 Human Fallibility and Decision-Making 213
10.2.4 Tax Obligations and Compliance 216
10.2.5 ‘Tax Nudges’ as an Instrument to Enhance Compliance 218
10.3 ‘Tax Nudges’ in The Netherlands 219
10.3.1 Introduction 219
10.3.2 Current Practice 220
10.3.2.1 Blue Envelope 220
10.3.2.2 Pre-filled Tax Return (PTR) 221
10.3.2.3 Horizontal Monitoring 223
10.3.3 Categorizing Tax Nudges 226
10.4 Legal Remarks on the Use of Tax Nudges in the Netherlands 227
10.4.1 Blue Envelop 227
10.4.2 Pre-filled Tax Return 227
10.4.3 Horizontal Monitoring 232
10.5 Conclusions 234