Deviant actions of taxpayers through the prism of behavioral finance

Abstract

In the modern world, taxes are the most important source of government funding. However, the efficiency of taxation directly depends on the level of tax payments and, accordingly, on the behavior of tax payers. Legislation forms a clear concept of the taxpayer and the specifics of his behavior, which is called tax culture. However, very often payers violate the designated conditions, thereby demonstrating deviant behavior. The latter should be understood to mean the individual's tendency to irrationality, which includes tax evasion that is contrary to the law. The study of the irrational behavior of individuals, conducted by D. Kahneman and A. Tversky, formed the basis of the theory of prospects, which designates the moments that influence the adoption of deviant decisions. Within the framework of the theory, four key components were identified: reliance on comparison, avoidance of losses, non-linear weighting of probability, and a downtrend in sensitivity to income and expenses. In the tax sphere of Ukraine, there are four types of tax evasion: tax evasion itself, tax optimization, tax minimization, tax planning. However, the factors provoking their appearance are the same. Combined into nine groups, they cover the time component, socio-economic, regulatory, socio-psychological, organizational, opportunistic, technical, moral-psychological and behavioral. Among the behavioral factors that directly affect the formation of deviant behavior in taxpayers, it should be noted the halo effect, the advantage of overconfidence over doubt, the law of small numbers, forecasting based on representativeness and avoiding losses. Each of the stated factors contributes to a false idea of the taxpayer about his own abilities and the depth of economic knowledge, creates the illusion of a minimal probability of an unfavorable outcome and is supported by the fear of losses.