In this paper, we try to solve the arising puzzle when looking at tax compliance and income distribution. Applying increasing relative risk aversion, most theoretical models predict that compliance, measured as a fraction of income, is increasing in income. This is in stark contrast to empirical data, where a decreasing relationship with a possible increase only for higher income levels is found. In order to solve this puzzle we include tax morale and reputational effects our model. The results show that, tax morale can resolve this issue.v