Neuroeconomic correlates of tax compliance motivations: the role of deterrence and morale framing

Understanding the motivational basis of tax compliance remains a central yet unresolved issue in tax experimental research. However, behavioral models of tax compliance do not fully explain the motivational drivers that shape one’s decision to pay taxes. In this study we aim to investigate how different compliance motivations, specifically deterrence and moral cues, shape behavioral and neural response during tax decision making. Using electroencephalogram (EEG) data recorded during a real-effort tax experiment, we first used both parametric and nonparametric analyses to assess the cognitive and neural processes triggered by distinct motivational frames. Using the distributional data analysis and a mixed effect model we then estimate the impact of motivational type, derived from the distributional differences in theta power, on tax payment decision. The authors find that moral motivation predicts much higher tax compliance than what other behavioral studies would suggest. The findings that neural markers provide more consistent evidence of motivational framing effects than behavior data alone are in line with the emerging evidence of the role of neuroeconomic approach to disentangle utility, norm-driven and emotional basis of tax decisions. The results highlight the potential of brain-based metrics for refining behavioral models and informing policy strategies beyond traditional economic experiments.