The Company You Keep: The Influence of Peer Groups on Tax Compliance

Abstract As judged by the size of the gap between the income taxes that should be paid and those that actually are paid, tax compliance will continue to be an important topic for the accounting literature. Although many believe that peer groups can influence the intention to pay taxes, the effect has been inadequately demonstrated and insufficiently nuanced. Using data created by an experimental tax task, this study shows a robust but not pervasive peer group influence. This interpersonal result is not limited to peers who are family members and is not stronger for different types of income. However, peer influence appears to be intertwined with, albeit not compromised by, taxpayer belief in the morality of tax paying. Implications for research and practice are offered.