– the contrast in drivers of compliance may be starker.<sup>96</sup> Among other factors, businesses may be (a) less directly reliant on, and concerned with, many kinds of public services valued by individuals; (b) less concerned with broad-based accountability, and more concerned with narrow responsiveness to business needs; (c) more narrowly focused on profit maximization owing to competitive pressures; and (d) subject to more fragmented, technocratic and bureaucratic decisionmaking, with more limited scope for tax morale to shape compliance decisions.

In light of the distinct characteristics of business tax morale, we apply the same broad trust framework – focused on fairness, equity, reciprocity and accountability – but tailored to the realities of different kinds of businesses. At a broad level, this means shifting what exactly we mean when we think about tax morale. To a greater extent than for individuals we expect business concerns about fairness, equity, reciprocity and accountability to be self-interested, and closely linked to long-term firm competitiveness and profit. Firms are likely to be concerned about fairness and equity not primarily owing to ethical concerns, but owing to concerns about their profitability, the predictability of the business environment and their competitive position. Firms are likely to be concerned about reciprocity and accountability not primarily out of a broad concern for social welfare, but out of a desire to secure specific government investments and policies relevant to their long-term well-being. In turn, we expect this broad orientation to result in issues related to fairness and equity – which have particularly direct implications for profit and competitiveness – to be comparatively important. Where individual tax morale is often defined as “non-pecuniary motivations for paying taxes,” this line is less clear-cut for businesses. While business tax morale remains focused on motivations for compliance beyond the likelihood of detection and extent of penalties, to some extent all business decisions are expected to have at least an indirect pecuniary dimension. This does not preclude the possibility that different firms may have quite different “values” around compliance, rooted in different strategies and identities, nor the possibility of the existence of social norms shaping tax compliance across firms.

The rest of this section turns to exploring each component of trust in greater detail, both for individuals and businesses.

# **Fairness**

Fairness captures the extent to which taxpayers feel that the process for paying taxes is fairly designed and administered. This includes their understanding of the system, their treatment by tax collectors, the fairness of penalties and the availability of recourse in cases of abuse. It broadly combines the categories of “procedural justice” and “retributive justice” from economic psychology and is fundamentally about how individual taxpayers experience tax administrators and the tax system. Taxpayers – either individuals or businesses – are more likely to comply if they feel that they have been treated respectfully, honestly, and impartially.<sup>97</sup>

> 96 Slemrod, J. (2004). The Economics of Corporate Selfishness. _NBER Working Paper 10858_ . Cambridge, MA: National Bureau of Economic Research.

> 97 Fjeldstad, O-H., & Tungodden, B. (2003). Fiscal corruption: A vice or a virtue? _World Development,_ 31(8):1459-1467 _;_ Shapiro, M.D., & Slemrod, J. (2003). Consumer response to tax rebates. _American Economic Review,_ 93(1): 381-396; Picciotto, S. 2007. “Constructing compliance: Game playing, tax law, and the regulatory state. _Law and Policy_ 29(1):11-30.

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