Cultural tightness, trust, and power in enforcing tax compliance

Abstract

The so-called Cultural Tightness–Looseness (CTL) concept intends to describe the socio-cultural foundation of societies by the strictness of social norms. In this paper, CTL is used to investigate its relevance to enforcing tax compliance. The CTL concept is formalised by structural payoff matrices for the confrontation between citizens and officials. Social norms and their impacts on the behaviour of the parties in a conflict are used to define several variants of tight and loose societies. The payoff matrices are employed to classify respective forms of societies. For a dynamic analysis, ‘power’ and ‘trust’, as policy measures of behaviour control, are introduced to determine which instrument or combination of instruments emerges as the most relevant and effective option in the respective societal setting. The result is that ‘trust’ emerges in tight societies as the more important instrument of behaviour control, whereas ‘power’ appears as the more crucial tool in loose societies. Therefore, it is concluded that power or the ‘cops and robbers’ approach is usually applied in loose societies to enforce tax compliance. By contrast, ‘trust’ via the provision of information and support for paying taxes can be more often used in tight societies.

Keywords:

• Cultural tightness
• cultural looseness
• social norms
• behaviour control
• trust and power
• tax compliance

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 See also Prinz (2016) and Prinz (2018) on the topic.

2 See Chapters 3 and 4 of Rummel (1975) for an overview on psychological and social field theories.

3 See Table 1 of Harrington and Gelfand (2014, 7991), and also Lopez, Devos, and Somo (2022) for a further application of CTL to measure the level of tightness–looseness in US states.

4 See Chapter 7 of Baumeister (2005, 340) for the general process.

5 In social psychology, in the so-called ‘social exchange’ theory of interpersonal relations (Blau 1964; Homans 1950), 2 × 2 matrices are also applied to determine the payoffs of personal interactions. For instance, Kelley and Thibaut (1978, 32) identify a series of three matrices for 2 × 2 relational games: the matrices of ‘bilateral reflexive control’, ‘mutual fate control’ and ‘mutual behaviour control’, where the payoffs of these matrices are added up to a ‘resultant matrix’. The approach taken in this paper is not based on these matrices. Instead, the dynamics of a certain number of 2 × 2 personal interaction matrices in a field with conflicts (tax compliance) are studied, depending on the tightness–looseness structure of the society.

6 In the following Figures 3–8, results are simulated with Mathematica.

7 In Figure A1 in Appendix, several other, less relevant, matrices and the implicated dynamics of trust–power for tight societies are presented.

8 In Figure A2 in Appendix, several other, less relevant, matrices and the implicated dynamics of trust–power for loose societies are presented.