Abstract: | The problem of tax evasion and subsequent revenue loss is an important one for our nation. Noncompliance with tax laws causes multibillion dollar annual losses for the U.S. treasury. An investigation of psychological variables is suggested as the most promising route to increase tax compliance. Hence, a review of the legal, economic, sociological, and psychological literature concerning the motivation and causes of noncompliance with tax laws is presented. Theoretical models and empirical studies addressing the issue of tax evasion are reviewed. An individual's feelings of equity and sense of norm commitment may be the crucial factors in the decision to comply or evade legally mandated taxes, superseding the notion of sanctions as the most effective deterrent. A legal reasoning model is one suggested alternative in the search for a causal explanation of noncompliance. |