What concept explains individuals' compliance with taxes due to their belief in the legitimacy of institutions?

What concept explains individuals' compliance with taxes due to their belief in the legitimacy of institutions?

• A. Value of exchanged goods
• B. Social contract theory
• C. Institutional legitimacy
• D. Normative ethics

Answer: (C)

The correct choice is institutional legitimacy, as this concept highlights the belief that institutions, such as tax authorities, operate fairly and justly. When individuals perceive these institutions as legitimate, they are more likely to comply with regulations, including tax obligations. This belief stems from the idea that institutions serve a purpose beneficial to society and are designed to uphold laws and regulations transparently. Individuals’ willingness to pay taxes can often be directly linked to their trust in governmental and institutional frameworks. If they believe that the tax system is fair, equitable, and operates under just principles, compliance increases. This legitimacy forms a social contract whereby citizens feel an obligation to contribute to the collective resources that enable governmental functions and societal stability. The other concepts, while related to ethics or social behavior, do not specifically encapsulate the dynamics of compliance through the lens of perceived legitimacy of institutions. For instance, social contract theory broadly discusses the agreements between individuals and societal structures, but does not focus solely on the belief in institutional authority. Normative ethics pertains to moral principles governing behavior but does not directly explain compliance with tax laws in the context of institutional trust. The value of exchanged goods instead focuses on trade and economics, which diverges from the core idea of compliance through belief in legitimacy.

The correct choice is institutional legitimacy, as this concept highlights the belief that institutions, such as tax authorities, operate fairly and justly. When individuals perceive these institutions as legitimate, they are more likely to comply with regulations, including tax obligations. This belief stems from the idea that institutions serve a purpose beneficial to society and are designed to uphold laws and regulations transparently.

Individuals’ willingness to pay taxes can often be directly linked to their trust in governmental and institutional frameworks. If they believe that the tax system is fair, equitable, and operates under just principles, compliance increases. This legitimacy forms a social contract whereby citizens feel an obligation to contribute to the collective resources that enable governmental functions and societal stability.

The other concepts, while related to ethics or social behavior, do not specifically encapsulate the dynamics of compliance through the lens of perceived legitimacy of institutions. For instance, social contract theory broadly discusses the agreements between individuals and societal structures, but does not focus solely on the belief in institutional authority. Normative ethics pertains to moral principles governing behavior but does not directly explain compliance with tax laws in the context of institutional trust. The value of exchanged goods instead focuses on trade and economics, which diverges from the core idea of compliance through belief in legitimacy.