Procedural Fairness and Tax Compliance.

In the traditional deterrence approach, taxpayers were considered as purely self-interested rational agents (Allingham & Sandmo 1972), and consequently, compliance was enforced by measures such as audits and sanctions. In the late nineties, a new method of regulation was proposed. This approach, the responsive regulation (Ayres & Braithwaite 1992), integrated the various measures to ensure compliance (i.e., education, persuasion and sanctions) and required tax authorities to adjust their regulatory efforts to the behavior of taxpayers by choosing when to punish and when to persuade (Braithwaite, Murphy & Reinhart 2007, Murphy 2004). It was recommended to use a cooperative and persuasive approach as the default option; only in cases of continuous non-compliance should the fiscal authority use more constraining enforcement strategies (Ayres & Braithwaite 1992). Punishment is expensive and may even be counterproductive. Therefore, it was suggested that this approach may be more effective in ensuring the long-term sustainability of the tax system by increasing the self-regulation of taxpayers (Braithwaite, Murphy & Reinhart 2007, Murphy 2004).