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This paper presents the results of a novel survey of 550 small and micro enterprises in Greece regarding their tax compliance behaviour and drawing some useful policy implications for a country facing one of the largest tax gaps in the developed world. We explore the determinants of such behaviour, by integrating economic and psychological perspectives on tax compliance. Results suggest that respondents perceive a strong connection between the quality of political and of tax institutions, while trust seems to play the most significant role in increasing intended compliance and in deterring strategic tax evasion. We contrast the theoretical results with the actual reported compliance behaviour of entrepreneurs and analyse how this behaviour is influenced by factors like perceived nature of power of tax authorities (legitimate versus coercive), perceived fairness of the tax system, etc. The strategy currently followed, that is toughening the profile of tax authorities is a viable short-term response to increase enforced tax compliance. The present study, however, has provided evidence on the multifaceted nature of power and trust and their relation with tax compliance, and the link between power and trust in political regulatory strategies. Current policies seem to completely miss that link.
