Nothing can be loved or hated unless it is first understood, including tax reform*

Young Han Lee, Nari Shin

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


This study analyzes how taxpayers' perceptions of vertical equity differ according to their economic interests when their tax burden changes as a result of tax reform. We examine the relationship between changes in tax burden and changes in perception of tax equity using survey data provided by the Korea Institution of Public Finance. The tax reform of 2014 was designed to reduce the tax burden of low-income earners and increase that of high-income earners. According to the referent cognitive theory, taxpayers compare the actual result of the tax reform with the reference results and reflect them in the evaluation of the fairness of the reform; they tend to make a negative (positive) evaluation of tax equity if their wealth decreases (increases). On the other hand, studies on tax reform of the early 2000s in the U.S. report that taxpayers do not evaluate the effect of tax reform accurately. The empirical findings of this study are summarized as follows. First, taxpayers have become more negative on vertical equity by and large, which is an unexpected result considering that the reform increases the tax burden of high-income earners and reduces that of low-income earners. Second, the low-income class with lesser tax burden shows a negative perception after the revision, which means the taxpayers in low-income class evaluate the vertical equity of the tax system negatively after the revision which is favorable to them, opposing the referent cognitive theory. The unexpected findings provide important implications for both tax regulators and academicians.

Original languageEnglish
Pages (from-to)37-68
Number of pages32
JournalKorean Accounting Review
Issue number1
StatePublished - 2020


  • Income tax
  • Referent cognitive theory
  • Tax reform
  • Vertical equity


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