In our previous post, we mentioned the distinction between “detection uncertainty” and “legal uncertainty.” Briefly, detection uncertainty refers to the risk or probability of getting caught and punished; legal uncertainty, by contrast, occurs when there is no bright line separating compliance from noncompliance (cf. Raskolnikov, 2017, p. 104), as is often the case in law.
To provide some context, consider the “rule of reason” test used by courts in antitrust cases or the reasonable man test of tort law. Both legal tests consist of general standards and thus generate some level of legal uncertainty, since there is no clear cut dividing line between reasonable and unreasonable behavior in the domains of antitrust and accidents. (In the alternative, compare the NFL’s Rule 2–the rule Tom Brady was accused of violating, i.e. the rule relating to the amount of air pressure in a football, a clear and precise rule if there ever was one–with Rule 8–the complex and convoluted rule defining what a completed pass or “catch” is. Remember Dez Bryant’s controversial no-catch?) What effect does legal uncertainty have on the levels of compliance, evasion, and enforcement?
Thus, of the two kinds of uncertainty, the latter (legal uncertainty) is the more interesting and puzzling one. After all, one would expect higher levels of evasion the greater the level of detection uncertainty (i.e. the less likely one is of getting caught or punished), and vice versa, all other things being equal. But the ultimate effect of legal uncertainty on the levels of compliance and evasion (and on the level of enforcement for that matter) is less clear. Several scholars (mostly economists and tax lawyers) have attempted to solve this puzzle. We will discuss their work and delve into their formal models of legal uncertainty in our next few blog posts.