regarding a server’s intention to comply with rules and laws or to behave in a socially ethical manner (Barnett et al., 1994; Forsyth, 1992; Reckers et al., 1994; Stead et al., 1990.) While these studies have indicated that ethics can drive an individual’s behavior, the ethical behaviors of society may change over time and can even differ from person to person. This inconsistency in determining what is ethical or moral is a result of fact that people have different beliefs and backgrounds. The country or culture in which a person lives can also impact the ethical or moral norms (Douglas et al., 2007; McGee, 1999; McGee, 2006; Schlenker & Forsyth, 1977). Prior studies conducted by Forsyth (1980, 1992) determined that an individual’s moral judgments are influenced by his/her different ethical beliefs. Thus, individuals’ ethical belief systems can be expected to influence their tip reporting compliance decisions. These ethical beliefs can be placed on a continuum with two end points: idealism and relativism. Individuals who score as highly idealistic are those who are strongly concerned with the welfare of others and understand the relation between their moral actions and the effect of those actions on others (Forsyth, 1992). A person with a strong idealistic position deems that actions that are morally right will always have positive results and morally wrong actions will have negative results. Alternatively, individuals with a less idealistic position believe that their actions, regardless of whether they are moral or immoral, can have both positive and negative results. While a highly idealistic individual believes in a positive correlation between moral actions and results for one’s self and others; a person with a low idealistic position believes that the proper moral decision is the one that has the most positive impact on the one’s self, regardless of the impact on others (Hastings & Finegan, 2011). This understanding of the ethical position leads to the following hypothesis: Hypothesis 2: Servers with a high idealistic position will be more likely report all their tips
A summary of the variables discussed in the hypotheses is provided in Table 1. Table 1 Summary of Variables in Hypotheses Hypothesis and Related Variables Description Proposed Relation to Tip Reporting Compliance Significance H1 – Form of Tips Cash, credit card, or other Credit card = high compliance Cash and other = lower compliance Yes H2 – Ethical Position: Idealism Actions that are morally right always have positive results for self and others Higher idealism = higher compliance No H2 – Ethical Position: Relativism Actions are on the situation and what enhances personal position rather than that for others Higher relativism = lower compliance No H3 – Negative Perception of Underreporting Correct reporting is moral and/or the underreporting of tax income has negative consequences. Negative perception = higher compliance No H4 – Positive Perception of Underreporting Underreporting is beneficial and an act of civil disobedience Positive perception = lower compliance Yes H5 – Overall Negative Perception of Taxation A taxpayer does not like taxes and wants to minimize paying taxes Negative perception = lower compliance No H6 – Overall Positive Perception of Taxation A taxpayer paying taxes a duty or responsibility of good citizenship Positive perception = higher compliance Yes H7 – Perception of Taxation of Tips The responsibility to report all tax income Positive perception = higher compliance Yes H8 – Knowledge of Tax Reporting Requirements Understanding of actual tip reporting requirements Higher tax knowledge = higher compliance Yes