Suggestions for Financing a Better & More Secure World: On Reciprocal Relations within Tax and Taxation

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Abstract:

How to achieve a better world for us all to live in? The recent WAAS conference ‘Addressing Global Turbulences: Sources & Solutions’ showcased an impressive array of possible solutions to the dire times we live in. It was truly inspiring, intellectually challenging but also heart-warming to hear about the broad grip and various initiatives dedicated people work with. The take-away is that fundamental changes are urgently needed to create a more sustainable world where people feel more secure—economically, politically, socially. WAAS calls for integrated modes of thinking, transdisciplinary approaches educating people, and a new paradigm for global development. It should not just be a world for the ultra-resourceful rich who can construct literal and practical walls to enjoy a luxurious lifestyle keeping the rest of the world’s people out. The key is how to create a better and more secure world for all.

At the conference there were many challenges noted for creating a better world. In this article I want to address two of these challenges while also claiming that there exists one solution. We just need to slightly rethink this solution.

The first challenge is how to finance the necessary transformations needed. There are rough estimates of what the various transformations would cost, which also include proposed solutions on how to finance these costs. The second challenge is how to get all on board when creating a better world. If the aim is to implement changes that are true democratic solutions, it is essential to include the people. Few understand the details of proposed solutions, this is what we have experts for, but we need commitment and dedication for the common goals. I thus argue that we need commitment and active participation of as many people as possible while financing the solutions for a better world. And there exists an institutionalized way of collective financing that we can use—Taxation.

This article argues for the need to rethink the role of taxation as an instrument to achieve common goals and create a better world. Yes, we need to tax the ultrarich and to ensure that the multinational corporations pay their fair share. But not only for fiscal reasons, an argument I will return to. In addition, we need the commitment of as many people as possible living on this planet: rich-poor, men-women, educated but even the illiterate. In this quest, I want to direct our thinking about what taxation means for many people and therefore also may mean if organized properly. My argument is about getting reciprocity right in society. Taxes are paid into a common coffer and then redistributed for common goods. But redistribution is closely connected to reciprocal relations. A taxpayer qua citizen wants to get something for taxes paid but also wants to be ensured that all other members of society pay their taxes and get their dues. We all must contribute, according to laws and regulations, and we all must benefit.

It is important to underline that my argument is not normative in the sense that the more taxes people pay, the better society will be. The aim is to instead lift the gaze from taxes as fiscal income, having an economic impact on society and people, and being seen as a distortive force on the economy.¹

The legal caveats of tax laws being equitable and fair, the practical book-keeping and accounting that precedes taxation, as well as its public collecting organization lies in the background.* These are all important issues and have an impact on how people regard taxes, but I aim to redirect our focus on the relations taxes and taxation create between citizens, and between citizens and their state. From a citizen’s perspective, reciprocal expectations indeed have an impact on the assumptions of what state and society should provide; a citizen wants to get something for taxes paid, not only for her/his personal benefit, but for a society worth living in.

This article is organized to substantiate my argument which means a deep dive into tax theory. First, I revisit the role of tax in society drawing on research in the past and in the present. Second, I redirect our thinking of people’s everyday understanding of what it means to pay tax and what their expectations are when paying them. Third, this means thinking about relationships created when paying. What taxes do beyond financing technical infrastructure, health, education and social welfare? How taxes become part of the much-needed change to a more holistic economic thinking. I finally outline a few suggestions for decision-makers to consider when financing a better world for all.

1. Tax in Society

Tax and taxation are the core of politics. What is taxed and how we are taxed are often hotly debated topics. Criticizing tax policy is simple. Economists say that taxes distort market behavior and create unwanted so-called externalities. Lawmakers and legal scholars struggle to make tax policies follow certain principles and fit existing legal structures. Politicians often alter taxes as vote-buying promises; create new taxes to redistribute or finance certain infrastructure without thinking about the entire tax system. Revenue administrations have to adapt laws to ensure collection; in the best of societies, it is consistent and compliant. Taxpayers bemoan that the state takes ‘something’ from them—what is morally and rightfully mine—finding limitless justifications, excuses and reasons for avoiding certain or all taxes. Reporting and paying tax are often cumbersome, bureaucratic, even expensive and unfair, and usually utterly boring. Taxation practices can make for intrusive inspections in what is considered private matters. It can be all that. But apart from its fiscal function of providing government and other public institutions with income to secure services, infrastructure and welfare, taxes can also create social inclusion and cohesion. ‘Taxes, after all, are dues that we pay for the privileges of membership in an organized society’ as Franklin D. Roosevelt put it.

How taxes are constructed and taxation conducted say something about a society. Aristotle, followed by John Locke, John Stuart Mill and other philosophers shaped Western thoughts about societies. They paid attention to taxation as constituting relations between public structures (state) and citizens. Adam Smith argued that all citizens should be taxed according to their ability and to the extent they would benefit from the state.² Joseph Schumpeter pointed out that studying taxation is one of the best starting points to understand the values of a given society. The fiscal organization—laws, tax collection system, control and compliance structures—may have a very large influence on how a society develops and the values that govern it.³

Yet, tax seems currently out of fashion. With the contemporary American move on changing the global discourse to tariffs replacing taxes to finance public infrastructure, there is an othering going on. Someone else, a foreign entity, will be paying for those services citizens will benefit from. It will not be those who use infrastructure that will be financing them. The othering is also going on if we only rely on large corporations and the ultrarich to be the only providers. We all need to chip in to feel that we are part of the quest for a better world.

2. What is Tax?

History and geography reveal an enormous ingenuity in creating taxes. The most common distinction made is between direct and indirect taxes. Direct taxes are those whose burden cannot be shifted from one taxpayer to another; one example is an employee’s income tax that is directly calculated on and levied from her/his salary. Wealth, gift and inheritance tax are other examples of direct taxes. Indirect taxes are levied by an intermediary, who is different from the person/the entity who bears the ultimate economic burden of such tax. Although such taxes cannot be directed to specific taxpayers, they are usually seen to have the largest impact on low-income earners who have, ceteris paribus, less money to spend on consumption than do high-income earners. Consumption taxes and VAT are examples of such taxes.

Most people do not like to pay taxes and they are often obfuscated from the general public view. Taxes thus have many names and politicians’ flair at naming (new) public revenue is astonishing. Take a moment and think about what different fees, duties, excises, levies etc., you pay to fund your public administration whether it is your government, region, county, and municipality.† Some of them you willingly pay, other might be more or less unacceptable due to what they are taxed on, the amount, how they are collected and what they fund. In essence all of these are taxes. Disguising tax with opaque names is one reason why politicians are increasingly distrusted. Citizens should in the name of democracy know and acknowledge what is public revenue regardless of what name it goes under. It is after all they who pay these taxes.

Yet, tax serves many purposes beyond funding public expenditures; ‘tax legislation for non-fiscal goals is an integral part of government policy’.⁴ Governments use taxes and taxation to attract business, change consumption patterns, redirect investments, create incentives for sustainable choices etc. Increased taxes on certain products and services make them more expensive in order to redirect consumption, e.g. to counteract alcohol and tobacco use. Taxes can play a role for improving the environment, for example, by subsidizing sustainable energy or by lowering or abolishing taxes altogether on certain products and services in order to make them more attractive for consumption. The purpose of progressive taxes has the objective of reducing inequalities of wealth and income among the citizens or helping certain categories of citizens, for example students, expectant parents or retired people. Taxes may influence investments in order to provide economic stability or collaborate with other economic policies for a solid and sound economic development of a given society. What is collected and how it is collected are central to public politics.

That taxation is the very foundation of the state—if there is no fiscal income the state is incapacitated from acting—seems to be taken for granted. Thinking about tax and taxation as a cornerstone of building values in society is often overlooked and forgotten in the political bickering of redistribution within society, taxations impact on the economy and especially on its distortive force on markets. There are of course quite a few nations that do not need taxes from individuals or other entities that can be taxed; the oil-rich states in the Middle-East own their source of revenue. In true socialistic states there is no private property or assets; they are owned by the state. But if all citizens/members of a democratic society are subject to some sort of tax it can have positive social cohesive force. Rightly constructed, collected and redistributed, taxes and taxation can create positive relations between citizens, ultimately making a more trusting and inclusive society.

Although fiscal affairs are extremely complicated in all their details, citizens/members of a society have a perception of the entire tax system. They often know what they pay tax on, they have an inclination of what public funds are used for, and they see how society develops. If we aim to create a better world for all, its creation needs to be truly democratic and all members of society need to have a say in it. One very important cornerstone of this is to contribute to it. Before continuing with how tax policies for a better world ought to be created, we need to dig into how relations are created as a result of exchanges.

3. Creating Reciprocal Relations

A transfer of a good or service is a start of a relation. As something is given, it is also a process of expecting something back now or in the future. The timelag between what is given and the counteraction of getting something back defines the type of transactions I talk about. People continuously exchange for all sorts of reasons and with various intentions. They engage in market transactions, trades, barters, swaps, transfers, and even thefts, making reciprocity in the sense that there is most often an expectation of a counteraction. And they pay tax.

The French sociologist Marcel Mauss wrote The Gift about 100 years ago, it is probably the most inaptly named book in social science as it discusses so much more than the altruistic transfer of a good.⁵ The Gift addresses the universal act of exchanging across history and cultures, focusing on the changes various types of exchanges due to human relationships. Mauss’s focus was on the one-way transfer of a good between people. He argued that such a transfer—the gift—is a total social phenomenon.⁶ Giving something commences reactions from an immense number of societal aspects and institutions; it creates expectations. Depending on how the recipient reacts to the one-way transfer of a good, it is the start of a relationship.

According to Mauss’s study, the norms of such a transfer—a gift—are three: to give, to receive and to reciprocate, i.e. give again. Something given provokes reciprocity in human relations, thereby complicating their relationship. The recipient feels forced to respond, starting a chain of other exchanges, dispersed with different time intervals. What is reciprocated and when will govern future relationships.

It is important to underline that the gift does not necessarily start a good relationship; having received something, the recipient can also choose not to respond, whereby the relationship will deteriorate or even end. Those who give and those who receive might have very different capabilities to reciprocate for an equal relationship. In this way reciprocity can also be exclusive, as those who give much also receive much. The gift, either altruistically given if there ever was one, or meant to create a good relation, is identified with the contributor and the gift’s intention is thereby real, changing, but also ambiguous.⁷ A gift offered might at first sight be provided out of sympathy with the recipient, but less noble intentions might be hidden—a quest for attention, blandishment, manipulation or even bribe.⁸ Reciprocity is not morally good in and of itself: reciprocal acts do not necessarily lead to a more just or fair society.⁹

There are various intentions for giving. Having given the most gives one the upper hand in relation to the recipient; to pay more than one receives in return can be described as acquiring societal status. Such a person is powerful and can offer favors that are more or less impossible to reciprocate; thus is their position in society affirmed. They can through their gifts create an extensive network of connections to draw upon. We all know the expression there is no such thing as a free lunch or you owe me one.

Giving alms seems to be the other side of this. Proving generous for someone in need by giving a few coins to a begging person, or supporting all sorts of collective activities with donations, charities, and endowments are both examples of this. The point is that giving in these ways—where the recipient cannot reciprocate—create status. Those who can ‘generously’ give are what Mauss called magisters, people with a social standing whom others look up to, with fear or with gratitude. People who provide more than others may view themselves with pride.¹⁰

This strong inner feeling of being morally obliged to return the gift is the quintessence of real-life reciprocity.¹¹ Taxes and taxation can be seen as a continuous act of giving, or rather of having to give. That these everyday exchanges create reciprocal relations between people—taxpayers—are often forgotten in tax compliance matters. When citizens pay into a common coffer, financing things that all in society ought to benefit from, there are simultaneously expectations created, if not of acquiring social status, then of getting something in return.

This is where reciprocity plays an important yet often forgotten role in contemporary tax politics.¹² Getting reciprocity right moves the gaze to the relations taxes create. Seeing taxes holistically as citizens’ explicit economic relation to the state and implicit relation to all other citizens is an important cornerstone to understand how to make a more sustainable and trusting society. This regards getting reciprocity right. In theory this is easy, yet in practice this proves a bit more complicated.

To take reciprocity seriously within taxation, I argue that the same type of expectations and relations that are created and maintained between people who exchange, can also reside within the relationship that citizens as taxpayers have with their state. Although exchanges between inhabitants and state are vast even in a daily perspective, impossible to quantify or account for, and immensely complicated in any society, there is an abiding sense of a reciprocal relationship. The exchanges making up this fiscal relationship can never be quantified, instead they regard how citizens perceive taxes and taxation’s social outcome and consequences.

In the following section, I outline some aspects that any politician and/or lawmaker ought to consider when inventing new taxes, drafting laws to legitimize them and constructing guidelines to collect them. Taxation’s principal function is fiscal; taxes provide governmental structures—regions, municipalities or other public institutions—with income to secure services, infrastructure and welfare. But following Schumpeter and others, we keep in mind how taxes are constructed, create relations between taxpayers and has an impact on societal values. Thus can we be on the road to a better world.

4. Reciprocity and Tax

If taxes are a democratic institution, as many citizens—taxpayers—as possible need to feel included. Regardless of what people pay tax on, there is usually some sort of expectation to get something for the fees, taxes and excises paid to the governing body. Ultimately, the taxpayers are the ones who are to be persuaded to comply with taxation; they are the ones who live in the society, make use of the public services, infrastructure and other resources the government and its institutions provide. Reciprocity regards getting something for taxes paid while also creating expectations that all other citizens pay to the common treasure.

Citizens are more or less forced to pay taxes, but also live in the society where the revenue is allocated. But there are scholars who say that taxation does not create reciprocity. Jacques Godbout and Alain Caillé argue that ‘[t]axes are not a gift’ disagreeing with Mauss in that a state and the gift ‘system’ are complementary. They argue that the state fulfils its distributive role in two very different ways: first, through complete anonymous indirect or direct monetary transfers; second, as a dispenser of various services: social, health, support, schools, etc. ‘The state system tends to make decisions independent of personal relations and characteristics, on the basis of abstract criteria derived from rights’.¹³ It is the democratic law that decides who should receive ‘gifts’ from the state, not by market selection but by a political decision about what the collectivity of citizens should acquire. As we know, this varies greatly between nation-states. From the state’s perspective citizens are both ‘taxpayers’, providers of revenue, and ‘clients’, recipients of governmental services. The phenomenon of the gift is subjective and a potential source of [great] inequality which is something a state should deter from engaging in.

One can agree with Godbout and Caillé if taking the state’s perspective. However, turning to the perspective of the taxpayers—the citizens—and looking at the entire system of taxes and what they provide can certainly be seen as containing reciprocal relations. Taxes have been given—taken is perhaps more appropriate as most taxpayers do not have a choice—but there is clearly an expectation of receiving something in return and that other citizens are receiving something similar. It is the state in its capacity of democratic institution that decides what will be returned, not as a personal gift but rather to select categories of citizens.

This means that reciprocity concerns all citizens in a given jurisdiction. All citizens should be made to provide according to societal values. A logical conclusion is that citizens are willing to pay more tax if they can trust that all other citizens provide their dues. Any taxpayer will be less willing to pay their taxes if they perceive that compatriots can cheat or are not made to pay their share. The result is that fiscal income decreases and there will be less revenue to spend on public services. If this starts to happen, it is a vicious circle. The perceived value of services given for the tax paid is reduced, resulting in the willingness to comply with taxes decreasing even more. So on the one hand, there is reciprocity between the state and the citizens and on the other hand, there is reciprocity among citizens.

Economists speak of horizontal and vertical reciprocity. The vertical variety of reciprocity illustrates the relationship between the public sector and taxpayers and the horizontal variety is the relationship between taxpayers themselves.¹⁴ If the aim is to create a fair society, we have to acknowledge both these relationships. They are usually studied as separate entities in taxation, yet as they are both potential sources of unfairness, they ought to be considered in tandem.¹⁵

To complicate the issue even further the reciprocal relationships between state and its citizens has to be equitable. The notion of reciprocity is slightly different for legal scholars. For them reciprocity is understood in terms of relationships between legal subjects, for example the legal (asymmetric) relationship between taxpayer and tax administration, but also between the lawgiver and taxpayers; more specifically in terms of communication.¹⁶ Discussing reciprocity in this way draws on philosophical notions in order to achieve a more equal status on the tax arena where counterparties are by definition unequal. Such a reciprocal relation between in essence two unequal parties means that a fair exchange has to be carefully maintained.¹⁷ Reciprocity cannot be presupposed. Instead, it is asked if the law itself should be presupposed to facilitate reciprocity as a desirable feat. There is a continuous need for legal and political interventions to secure a fair and equitable relation between citizens.¹⁸

And not only between citizens: a tax authority is the right hand of the state and has considerable powers to collect revenue and investigate taxpayers’ (economic) lives. It is appropriate to ask what the implications for tax compliance are if the communication of tax law is governed by the principle of reciprocity compared to law as top-down command.¹⁹

I noted initially that reciprocity does not always create positive relations. But how the ‘total social phenomenon’ of having paid tax will govern the relationship between citizens and state. Taking this reciprocal approach to taxes can also shed light on why people cheat with taxes. Avoiding and evading certain tax is often justified with a feeling of having contributed too much and not receiving enough in return. Taxes are said to be too high, the law text too encompassing, the tax is seen as illegitimately applied to services or goods that should not be subject to tax, only certain citizens are subjected to the tax etc.

Justifying ‘cheating’ can also be due to taxes being incomprehensible; tax can after all be enormously complex and not being equitably applied or collected.²⁰ If the perception is that laws are not encompassing or do not apply to all taxpayers in a similar way, avoiding and evading tax can be easily justified.

That is why it is so important to pay attention to both horizontal and vertical reciprocities and especially to the quality of the relationships that each of these create; among citizens and between citizens and their state’s public institutions.

Reciprocity denotes the status of a relation or an action between people, countries, organizations that is governed by ‘a mutual exchange of commercial or other privileges’. There is a mutuality to a reciprocal relationship. Although Joseph Schumpeter combined a view on taxation from historical, financial and sociological perspectives, he had in addition his practical experience of having served as a finance minister in the Austrian Republic after WWI where he mainly took a macro perspective. Taxation should be understood as being at the nexus of a nation’s economy, the formation of the state governing this nation and the expectations—the values—held by citizens peopling this state.²¹

If taking reciprocal relationships as an outcome of taxation seriously, one could argue that reciprocity must be even more pertinent in states with high tax rates—that is, where a large part of the price of a private purchase, as well as net personal income, is tax. There are different explanations for why high tax rates have been accepted: because of war, as some historical research has indicated, but also because of the building of a welfare state. High taxes can be said to originate in the organizational strength of societal groups and of the institutional structure of the state. Swedes actually became more content with taxation from 1960 to 1980 despite the almost exponential increase in tax burden during the period.²² According to surveys, it was not taxation per se that Swedes appreciated, but the benefits provided by it. They got something in return for taxes paid.

5. Making Sure (Other) Taxpayers are Made to Pay

Taxpayer can argue that they do not have a choice. They need to obey laws and regulations and therefore pay up. Rightly so. But as laws are always subject to some interpretation, they can be more or less willing to pay up. The challenge for the state is to get reciprocity right in the sense of creating taxes and taxation policies that the majority adhere to—that they feel that they get something in return.

Tax laws aside, taxes also need to be collected. The way this is done also impacts on people’s willingness to pay; it has even been stated that the way tax is collected is more important for legitimacy than the actual tax laws.²³ Many have been the strategies of tax collectors ever since a ruler identified the possibility to extract valuables from those he ruled over—especially the powerless who do not have the means of resisting. History and literature are full of such figures which are usually depicted as a-human, greedy, immoral and often vile. The Sheriff of Nottingham has been seen in countless pursuits of Robin Hood who defends the poor from exorbitant collection. Swedish medieval priest Olaus Magnus described the Nordic bailiffs as harsh and their methods extortionate.²⁴ Our contemporary tax collectors are described as finicky bores, engrossed in bureaucratic details. They share the a-human approach with Nottingham’s Sheriff, not primarily in making life difficult for taxpayers, but rather when making sure that regulations and guidelines are followed. Tax administrators conduct devastatingly boring work that wears them down, such as those depicted in David Foster Wallace’s novel The Pale King. There are countless histories of corrupt tax administrators. Such people have nothing but contempt for society, tax administration and/or fellow citizens and only use their position to enrich themselves. The Sheriff of Nottingham is one, Nicolai Gogol’s masterpiece of dramatic satire The Inspector General is another. These stories reveal both timeless illustration of intricate methods used for tax collections and flawed bureaucrats taking an illegitimate share of the commons. These are unfortunately not stories from the past; countless examples of contemporary corrupt tax collectors exist. That the Kenyan Revenue Authority went bankrupt in 2015 due to internal corruption is a recent tragic example.

Tax administrations have to be trustworthy in their work, applying the law consistently and equitably. It can be tempting to ‘pick the low-hanging fruit,’ collecting tax from citizens who have reported simple tax returns with easily identified errors while letting the more complicated cases, which usually belong to those who can afford to pay tax advisors, off the hook. If citizens perceive that other citizens are not made to pay their fair share, e.g. that taxation is not conducted equitably and according to democratic decisions, there are many ways to justify negligence in contributing fairly to the state. The way taxes are collected is thus as important as the taxes themselves. It is important to keep in mind the somewhat surprising insight that the way taxation is conducted carries more weight in citizens perception of legitimate taxes than the actual construction of tax laws.

6. Suggestions

What should a tax system that finances a better world for all contain, one where people feel economically, politically, socially more secure?

1. All people should contribute. This does not mean that they all contribute the same amount. We should not pay a fee for making the world better. We need to use taxation’s redistributive mechanism to create such a world. As the ultrarich uses many more resources of our common world, they should obviously contribute with more of their resources to it. The richer who have more means, consume more, and also use the planet and its resources to a larger extent, should contribute more. There are excellent suggestions, e.g. an international wealth tax on large fortunes as suggested by Gabriel Zucman. Such tax does not only provide a large fiscal income but is also meant to reduce inequality and limit tax evasion. But even the poorest persons ought to contribute with something, thereby are expectations all around created for getting something in return — a better world.
2. Such a tax system needs to be robust, simple, and understandable by those who contribute to it. We all need to understand it. There is no need to make complicated and intricate systems that can only be understood and implemented by select experts and bureaucrats. Such systems alienate people; it makes them feel stupid when all that they do is to contribute. Moreover, complicated tax systems are prone to avoidance and evasion. There is an entire industry of well-paid tax advisors counselling people for their own benefit and not for the benefit of society as a whole.
3. The simplicity includes transparency in the process of collecting tax but also what it finances. People should be able to trace what public fundings are used for. Even the illiterate should be able to see with their own eyes that what they contributed to is used for the common good.
4. It is important to take command of the narrative of what such a tax system does. When the distribution of news is dominated by social media steered by algorithms that are easily manipulated, it is quite easy to take command of a narrative. We need communication about such a tax system, who pays and what it finances.
5. The narrative of what taxes do for society thus has to be changed. As Garry Jacobs and Ketan Patel pointed out in their recent article, we need to rethink and address many unanswered questions.²⁵ As Richard Musgrave pointed out, taxes have manifold objectives: they regard resource allocation, income redistribution, and economic stability.²⁶ Financing a better future also needs to rethink how you see tax beyond the economic paradigm. Does it distort market behavior and create unwanted so-called externalities? Are taxes something the government take? As FDR wrote: Taxes, after all, are dues that we pay for the privileges of membership in an organized society. We need a profound cultural change of how we see taxes’ role in society.

This type of thinking ought to be implemented on a global level. Here the UN can continue to step in and take a more prominent role.‡

7. Conclusion

There are many lessons to be learnt from research on why people comply with their tax payments. If a state taxes its citizens, it creates expectations among them, regardless of how poor or rich you are and how little or how much tax is paid. The point is that taxes paid create an expectation that the state will provide some benefits for the taxpayer in return. One very important issue to pay attention to is reciprocity. The expectation to get something back has to be fulfilled; the something that will be of benefit for them, their family and friends, their neighborhood and for issues they believe that the state should provide for its citizens. Against this background, we need to rethink taxation in terms of reciprocity.

The predicament of the gift is threefold; to give, to receive and to give again. In our contemporary societies, there is an endless giving and receiving going on every day and in manifold ways. This is also what people do with taxes. They pay all sorts of taxes, taxes finance public goods for the same people, and people pay more taxes.

There are a number of modelling attempts applying notions of fairness, altruism, reciprocity, trust, social norms, guilt, shame, and morality in various capacities when aiming to understand why people comply with taxation. Reciprocal behavior is always posed as a response to that of other players—perceived, real, imagined. Reciprocity is a disposition to cooperate with others, but also to punish those who cooperate for self-interest; it is a norm that makes people comply with tax rules. ‘Acting under this norm an individual will respond to another’s act in the same way in which that person treated him’.²⁷ If a person is treated with generosity and kindness, s/he will respond in kind whereas if treated badly the response will be in the same fashion. The implication of a strong norm of reciprocity is also said to go for taxes; if others are perceived to pay, so will I, whereas if no one else complies, why would I? Reciprocity thus needs careful nurturing as its impact on tax compliance can work both ways.

This is Mauss’s lesson; his true gift. To believe that giving something creates expectations of a countergift which in turn triggers more giving, creating a society where people will never be quits.²⁸ Tax revenue collected creates demands on the state, on its institutions and the people employed in various governmental capacities. Taxes paid demand a counter-gift of sorts. Reciprocity in tax compliance is not merely a tit-for-tat relationship; it encompasses more. Citizens must believe that their neighbours too, and all other citizens pay for what they collectively should share; that they can perform the everyday exchanges; that they pay according to the same rules; and that these rules are interpreted equally and fairly. The amount and tax levels will obviously be subject to discussion, but of importance is that all people contribute and therefore all people have expectations of getting something back.

Policy makers must pay careful attention to how taxation is done, balancing between providing something to taxpayers for their contribution but also making sure that all other citizens qua taxpayers pay their taxes according to the same rules. The enforcement of the law needs to pay attention to reciprocity between the state and citizens, while making sure that horizontal and vertical reciprocity is simultaneously adapted. Reciprocity is all around us. Acknowledging its force may develop and maintain a better and sustainable society and state.

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24. Westerman, P. “Reciprocity: A Fragile Equilibrium.” Netherlands Journal of Legal Philosophy 43, no. 2 (2014): 172–184.

Notes

1. Joseph A. Schumpeter, “The Crisis of the Tax State,” International Economic Papers 4 (1954 [1918]): 5–38.
2. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Chicago: Encyclopædia Britannica, 1976)
3. R. A. Musgrave, “Schumpeter’s Crisis of the Tax State: An Essay in Fiscal Sociology,” Journal of Evolutionary Economics 2, no. 2 (1992): 89–113.
4. Hans Gribnau, “Taxation, Reciprocity and Communicative Regulation,” Tilburg Law Review 20 (2015): 191–212.
5. Keith Hart, “Marcel Mauss: In Pursuit of the Whole. A Review Essay,” Comparative Studies in Society and History 49, no. 2 (2007): 473–485.
6. Marcel Mauss, The Gift: Expanded Edition, selected, annotated, and translated by Jane I. Guyer (Chicago: Hau Books, 2016).
7. Jacques Derrida, The Gift of Death (Chicago: University of Chicago Press, 1995); J. Davis, Exchange (Minneapolis: University of Minnesota Press, 1992), 79.
8. E. Komter, The Gift: An Interdisciplinary Perspective (Amsterdam: Amsterdam University Press, 1996).
9. A. E. Komter, “Idealized versus Real-Life Reciprocity: How to Strike the Balance?,” Netherlands Journal of Legal Philosophy 43, no. 2 (2014): 158–171; Alena V. Ledeneva, Russia’s Economy of Favours: Blat, Networking and Informal Exchange (Cambridge: Cambridge University Press, 1998).
10. Mauss, The Gift.
11. Komter, “Idealized versus Real-Life Reciprocity,” 162.
12. Lotta Björklund Larsen, A Fair Share of Tax: A Fiscal Anthropology of Contemporary Sweden (London and New York: Palgrave Macmillan, 2018), open access.
13. Jacques T. Godbout and Alain Caillé, The World of the Gift (Montreal: McGill–Queen’s University Press, 1998).
14. Bruno S. Frey and Benno Torgler, “Tax Morale and Conditional Cooperation,” Journal of Comparative Economics 35 (2007): 136–59; Camille Bazart and Aurélie Bonein, “Reciprocal Relationships in Tax Compliance Decisions,” Journal of Economic Psychology 40 (2014): 83–102.
15. Jan Schnellenbach, “Vertical and Horizontal Reciprocity in a Theory of Taxpayer Compliance,” in Developing Alternative Frameworks for Explaining Tax Compliance, ed. James Alm, Jorge Martinez-Vazquez, and Benno Torgler (New York: Routledge, 2010), 56–73; Bazart and Bonein, “Reciprocal Relationships.”
16. Hans Gribnau, “Legal Certainty: A Matter of Principle,” in Retroactivity of Tax Legislation, ed. Hans Gribnau and Mauro Pauwels (Amsterdam: EATLP, 2013), 76–77; Gribnau, “Taxation, Reciprocity and Communicative Regulation,” 191–212.
17. Pauline Westerman, “Reciprocity: A Fragile Equilibrium,” Netherlands Journal of Legal Philosophy 43, no. 2 (2014): 172–84.
18. Ibid., 184
19. Gribnau, “Taxation, Reciprocity and Communicative Regulation,” 191–212.
20. Elisabeth S. Clemens, “Review: Good Reasons to Stop Avoiding Taxes,” American Bar Foundation Review 24, no. 2 (1999): 513–517.
21. Musgrave, “Schumpeter’s Crisis of the Tax State,” 11.
22. Axel Hadenius, “Citizens Strike a Balance: Discontent with Taxes, Content with Spending,” Journal of Public Policy 5, no. 3 (1985): 349–363.
23. Gribnau, “Taxation, Reciprocity and Communicative Regulation,” 191–212.
24. Olaus Magnus, Historia om de nordiska folken, vol. 1–4 (Stockholm: Gidlunds förlag, 1976 [1555]).
25. Garry Jacobs and Ketan Patel, “Sources and Solutions for Global Turbulence,” Cadmus Journal 5, no. 4 (July 10, 2025), https://cadmusjournal.org/article/volume-5-issue-4/sources-and-solutions-global-turbulence.
26. Musgrave, “Schumpeter’s Crisis of the Tax State,” 89–113.
27. Marjorie E. Kornhauser, “A Tax Morale Approach to Compliance: Recommendations for the IRS,” Florida Tax Review 8, no. 6 (2007): 599–634.
28. Nicholas Thomas, Entangled Objects: Exchange, Material Culture, and Colonialism in the Pacific (Cambridge, MA: Harvard University Press, 1991).