This manuscript proposes that tax avoidance can be better understood and mitigated as a sustainability problem. Tax avoidance is not just a financial problem for tax authorities, but one that erodes critical common spaces necessary for the smooth functioning of regulatory compliance, organizational integrity, and society. Defining tax avoidance as a sustainability problem offers a broader and more holistic understanding of the organizational and societal consequences of tax avoidance behavior. Sustainability is also a mature and legitimized concept that can readily (...) incorporate taxation. A variety of established sustainability metrics have the capacity to incorporate anti-tax avoidance measures or publicize firms that engage in fair tax practices. This manuscript concludes that integrating sustainability principles, in conjunction with important extant work on corporate social responsibility and taxation, can advance the goals of decreasing the occurrence and acceptability of tax avoidance. (shrink)

This review summarizes and critiques the empirical ethical decision-making literature from 1996–2003. One hundred and seventy-four articles were published in top business journals during this period. Tables are included that summarize the findings by dependent variable – awareness, judgment, intent, and behavior. We compare this review with past reviews in order to draw conclusions regarding trends in the ethical decision-making literature and to surface directions for future research.

We study how an organization’s error-management climate affects organizational members’ beliefs about other members’ willingness to report errors that they discover when chance of error detection by superiors and others is extremely low. An error-management climate, as a component of the organizational climate, is said to be “high” when errors are accepted as part of everyday life as long as they are learned from and not repeated. Alternatively, the error-management climate is said to be an “error averse” climate when discovery (...) of errors invokes the laying of blame on those admitting to or found committing errors. We examine the effects of this error-management climate in a professional services environment where uncorrected errors may have severe consequences and discovery of work errors is crucial for organizational success. We find that error-management climate affects organizational members’ beliefs about what other members will report about discovered self-made errors, with a high error-management (versus error averse) climate leading to greater reporting willingness. We also find a significant interaction with a key contextual variable, error type (conceptual or calculation), that suggests the effect is more significant for conceptual errors than calculation errors. Our findings suggest that an organization’s error-management climate is an important factor in promoting ethical behavior of employees, especially junior employees, carrying out routine tasks whose failure to report errors discovered incidental to those tasks may have severe implications for their organizations. (shrink)

In the last decade, advances in technology have significantly disrupted the way firms provide goods and services. At the forefront of this technological disruption is the sharing economy, where individuals earn income by providing services or sharing assets through peer-to-peer platforms. With global revenues in the sharing economy projected to increase substantially in the next decade, income from this economy will continue to be an important source of tax revenues for governments around the world. However, sceptics argue that the sharing (...) economy inherently lends itself to dishonest reporting of taxable income. We employ an online experiment, using 746 taxpayers, to observe whether the prosocial benefits often promoted by P2P platforms reduce honest reporting of taxable sharing economy income. Consistent with moral licensing theory, we find that earning income from a prosocial-oriented P2P platform liberates taxpayers to dishonestly report their sharing economy income, and this result is fully driven by taxpayers whose personal values are incongruent with values promoted by the P2P platform. Our paper contributes to the limited but growing research on the sharing economy and its implications for ethical decisions. It also adds to the moral licensing literature by identifying value congruency as an important moderator for moral licensing effect. (shrink)

This review summarizes and critiques the empirical ethical decision-making literature from 1996-2003. One hundred and seventy-four articles were published in top business journals during this period. Tables are included that summarize the findings by dependent variable - awareness, judgment, intent, and behavior. We compare this review with past reviews in order to draw conclusions regarding trends in the ethical decision-making literature and to surface directions for future research.

This study derives an improved model of managers' decision-making behavior regarding possibly failing projects. Instead of adopting cognitive moral development used by Rutledge and Karim (Accounting, Organization and Society 24, 173-184, 1999) this investigation uses the agency theory framework to consider individual moral philosophy for the improvement of decisions regarding possibly failing projects. This research hypothesizes that a manager with low relativism has a stronger tendency to discontinue a possibly failing project than one with high relativism when agency problem are (...) present or absent. Also, this study suggests that a manager with high idealism has a stronger tendency to discontinue a possibly failing project than one with low idealism. Through experiments this work finds that agency problem is a significant factor on decisions regarding possibly failing projects in all circumstances. This result is consistent with prior literature and shows agency problem universality. Next, the empirical evidence supports the hypothesis that a project manager with low relativism tends to discontinue a possibly failing project more than one with high relativism, showing that individual moral philosophy can partially mitigate the phenomenon of escalating managers' commitment. (shrink)

Tax administrators are empowered by the state to secure compliance with tax obligations. Enforcing compliance on the ground is complex, and street-level administrators often engage in the “art of the possible,” leading to dilemmas in the field. This paper examines tax administrators’ practices with regard to Jamaican property tax defaulters with outstanding tax liabilities in excess of 3 years. Drawing on interviews with tax administrators and other key agents, we find that tax administrators reposition themselves from objective enforcers to empathizing (...) officials engaging in schemes of action, doing what they can do rather than what they should do. This is a practical-sense approach to securing compliance. We identify two forms of empathy, assimilated and cynical, and conclude that administrators’ empathetic identification with defaulters does not necessarily arise solely from concern for social cohesion, or inter-subjective compassion, but also sometimes from self-interest. (shrink)

The purpose of this study is to determine whether there are cross-cultural differences between Chinese and Canadian business students with respect to their assessment of the ethicality of various business behaviors. Using a sample of 147 business students, the results indicate cultural crossvergence; the Chinese (72 students) and Canadians (75 students) exhibit different ethical attitudes toward questionable business practices at the individual level but not at the corporate level. A social desirability bias (a tendency to deny socially unacceptable actions and (...) to admit to socially desirable ones) is also found to be a cross-cultural phenomenon, with the Canadians demonstrating a greater bias than the Chinese. Finally, this bias causes respondents to increase their assessment of the un-ethicality of questionable business activities. (shrink)

We conduct an empirical study on the determinants of the psychological costs of tax evasion, also known as tax morale. As a preliminary step, we build a model of tax evasion including non-monetary considerations, show the relationship between tax compliance and tax morale. In the empirical analysis of tax morale we find, using a binomial logit model, that the justification of tax evasion can be explained by the presence of grievance in absolute terms (those who feel that taxes are too (...) high, those who feel that public funds are wasted, and those who accept underground economic activities); and grievances in relative terms (the suspected level of others’ tax evasion). The sense of duty and the level of solidarity are also relevant factors, but to a lesser extent. (shrink)

We investigate the justifications provided by the Public Company Accounting Oversight Board when sanctioning audit firms and individual auditors, as disclosed in the publicly released Settled Disciplinary Orders. Employing responsive regulation theory, we seek to gain an understanding of violating behaviors by audit firms and individual auditors that attract regulatory responses ranging in nature from persuasive to punitive sanctions. Using 298 SDOs issued by the PCAOB from 2005 to 2020, we find that the frequency and severity of PCAOB sanctions at (...) the firm level are positively associated with auditing standards violations, independence issues, and reckless behavior. At the individual auditor level, integrity violations and reckless behavior are positively associated with the frequency and severity of PCAOB sanctions. Our findings indicate that significantly higher financial penalties for individual auditors arise from manipulation of audit evidence. Further, the PCAOB financially penalizes Big 4-affiliated auditors and firms significantly more than their non-Big 4 counterparts. Other factors such as multiple individuals being implicated in an SDO and whether a firm and individual are both implicated in the SDO are important considerations in sanction imposed by the PCAOB. Overall, our findings suggest that the PCAOB adopts a responsive enforcement strategy when monitoring the auditors in their ethical and audit compliance efforts. (shrink)

Guilt is a powerful emotion that is known to influence ethical decision-making. Nevertheless, the role of guilt cognitions in influencing restorative behaviour following an unethical action is not well understood. Guilt cognitions are interrelated beliefs about an individual’s role in a negative event. We experimentally investigate the joint impact of three guilt cognitions—responsibility for a decision, justification for a decision, and foreseeability of consequences—on a taxpayer’s decision to make a tax amnesty disclosure. Tax amnesties encourage delinquent taxpayers to self-correct to (...) avoid severe penalties that would result if their tax evasion were discovered. Our findings suggest a three-way interaction effect such that taxpayers are likely to make tax amnesty disclosures when they foresee that they will be caught by the tax authority, unless they can diffuse responsibility for their evasion and justify their evasion. Implications for tax policy and tax professionals are discussed. (shrink)