Abstract Prior research has investigated the effects of taxpayers' perceptions of tax law equity and complexity on taxpayer compliance. While tax equity and complexity, and taxpayers' perceptions of each, are often hypothesized to be related, the nature of that relationship is uncertain. Some believe they are incompatible; others argue that equity sometimes requires complexity. This research suggests that the complexity-equity relationship is more complex than originally considered. Results suggest that while perceived complexity generally has a negative effect on perceptions of equity, taxpayers have consistent beliefs regarding the necessity of tax complexity. These beliefs are found to moderate the effect of complexity on equity perceptions. Further, beliefs regarding the justification of complexity are found to differ systematically across different tax items as well as complexity sources. The importance of taxpayers' understanding of the need for tax complexity has at least two important implications for simplification efforts aimed at improving compliance: (1) compliance might be improved most by targeting for simplification those areas for which complexity is seen as least justified rather than targeting areas seen as most complex; and (2) efforts aimed at educating taxpayers as to the purposes of existing tax complexity may be just as effective in Improving equity perceptions as a law change, which itself can be a source of complexity.
Carnes et al. (Sun,) studied this question.