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The determinants of tax morale in comparative perspective: Evidence from European countries

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Abstract

Applying a multilevel model, we argue that tax morale is a function of individual-and contextual-level variables. Evidence presented in this article, based on the 2004–2005 European Social Survey and information on institutional settings, shows that tax morale in European countries varies systematically with socio-demographic characteristics, personal financial experiences, political attitudes, on the one hand, and regional GDP and tax arrangements on the other hand. Moreover, cross-national differences in tax morale are also related to ethnic and linguistic fractionalizations.

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... Luttmer and Singhal (2014, pp.155) numbered five main mechanisms acting as channels in order to urge citizens to tax compliance. The five classes Horodnic, 2018;Owsiak, 2007;Frey & Torgler, 2007 Citizens' trust in court and the legal system Hug & Sporri, 2011;Kaplanoglou & Rapanos, 2011;Cummings et al., 2009;Uslaner, 2008;Feld & Torgler, 2007 Citizens' trust in the Government and Parliament Chan et al., 2018;Hug & Sporri, 2011;Kaplanoglou & Rapanos, 2011;Cummings et al., 2009;Uslaner, 2008; Citizens' trust in the state which plays the role of the tax collector and provider of public goods and services Chan et al., 2018;Cummings et al., 2009;Owsiak, 2007;Hanousek & Palda, 2004 Perceived level of impunity and accountability Frey & Torgler, 2007;Torgler & Schneider, 2007 Transparency of public spending Sipos, 2015 Citizens' trust in tax authorities and tax officials Horodnic, 2018;Randlane, 2016;Kaplanoglou & Rapanos, 2015;Richardson, 2008 Quality of services provided by public organizations and tax authorities' respect to citizens Alm & Torgler, 2011;Torgler et al., 2008;Mittone, 2006 Fight against corruption and bureaucracy Horodnic, 2018;Randlane, 2016;Bitzenis & Vlachos, 2015;Luttmer & Singhal, 2014;Lago-Peñas & Lago-Peñas, 2010;Cummings et al., 2009;Torgler et al., 2008; Compliance with the principles of fair tax burden (fair tax rate) Alasfour et al., 2016;Lago-Peñas & Lago-Peñas, 2010;Owsiak, 2007;Torgler & Murphy, 2004 Trust in the principle of tax reciprocity (or trust in the way the government spends expenditure for public goods and services) Horodnic, 2018;Bitzenis & Vlachos, 2018;Randlane, 2016;Luttmer & Singhal, 2014;Barone & Mocetti, 2011;Cummings et al., 2009 Fairness of tax system Cyan et al., 2016;Ҫevik 2016;Cummings et al., 2009;Torgler et al., 2008 of these channels are: (1) intrinsic motivation, (2) reciprocity, (3) peer effects and social influences, (4) long-run cultural factors and (5) information imperfections and deviations from utility maximizations (Luttmer & Singhal, 2014, pp. 155). ...
... Luttmer and Singhal (2014, pp.155) numbered five main mechanisms acting as channels in order to urge citizens to tax compliance. The five classes Horodnic, 2018;Owsiak, 2007;Frey & Torgler, 2007 Citizens' trust in court and the legal system Hug & Sporri, 2011;Kaplanoglou & Rapanos, 2011;Cummings et al., 2009;Uslaner, 2008;Feld & Torgler, 2007 Citizens' trust in the Government and Parliament Chan et al., 2018;Hug & Sporri, 2011;Kaplanoglou & Rapanos, 2011;Cummings et al., 2009;Uslaner, 2008; Citizens' trust in the state which plays the role of the tax collector and provider of public goods and services Chan et al., 2018;Cummings et al., 2009;Owsiak, 2007;Hanousek & Palda, 2004 Perceived level of impunity and accountability Frey & Torgler, 2007;Torgler & Schneider, 2007 Transparency of public spending Sipos, 2015 Citizens' trust in tax authorities and tax officials Horodnic, 2018;Randlane, 2016;Kaplanoglou & Rapanos, 2015;Richardson, 2008 Quality of services provided by public organizations and tax authorities' respect to citizens Alm & Torgler, 2011;Torgler et al., 2008;Mittone, 2006 Fight against corruption and bureaucracy Horodnic, 2018;Randlane, 2016;Bitzenis & Vlachos, 2015;Luttmer & Singhal, 2014;Lago-Peñas & Lago-Peñas, 2010;Cummings et al., 2009;Torgler et al., 2008; Compliance with the principles of fair tax burden (fair tax rate) Alasfour et al., 2016;Lago-Peñas & Lago-Peñas, 2010;Owsiak, 2007;Torgler & Murphy, 2004 Trust in the principle of tax reciprocity (or trust in the way the government spends expenditure for public goods and services) Horodnic, 2018;Bitzenis & Vlachos, 2018;Randlane, 2016;Luttmer & Singhal, 2014;Barone & Mocetti, 2011;Cummings et al., 2009 Fairness of tax system Cyan et al., 2016;Ҫevik 2016;Cummings et al., 2009;Torgler et al., 2008 of these channels are: (1) intrinsic motivation, (2) reciprocity, (3) peer effects and social influences, (4) long-run cultural factors and (5) information imperfections and deviations from utility maximizations (Luttmer & Singhal, 2014, pp. 155). ...
... Similarly, trust in the justice system and the parliament has also a highly significant positive effect on tax morale. Many researchers have, studied the relationship between the quality of governance, tax morale and tax compliance,, such as Horodnic, 2018;Alasfour et al., 2016;Luttmer & Singhal, 2014;D'Arcy, 2011;Lago Peñas & Lago Peñas, 2010;Levi & Sacks, 2010;Alm & Torgler, 2006;Frey & Torgler, 2007;Cummings et al., 2009). Kouamé (2017) has shown that trust in public institutions increases taxpayers' willingness to comply. ...
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Every modern and organized country is making progress when its citizens pay their taxes regardless of whether they will be audited or not by the tax authorities. This research attempts to understand the impact of various tax morale related factors on the taxpaying behavior of the exhausted, due to the 10 years long financial crisis, Greek citizens. A new conceptual model is proposed and empirically tested using data from 1.014 Greek citizens from 50 regions of Greece. The results suggest that tax conscience exerts the highest positive and direct influence on tax morale. Furthermore, the crucial role of trust in reciprocity, trust in democracy and trust in public services, which directly affect tax morale, is also confirmed. In addition, it is found that women have higher tax morale than men, while the importance of perceived (level of) tax justice is highlighted, since it indirectly influences tax morale through its strong direct effect on a large number of trust in the quality of governance related factors.
... An aggregate 'tax morale' index is then calculated (Williams and Horodnic, 2015a,b,c). Similar approaches are used in other surveys including the International Social Survey (Torgler, 2005b), the World Values Survey (Alm and Torgler, 2006;Torgler, 2006), the European Values Surveys (Hug and Spörri, 2011;Lago-Peñas and Lago-Peñas, 2010), the British Social Attitudes Survey (Orviska and Hudson, 2003), the Latinbarometro (Torgler, 2005a) and the Afrobarometer (Cummings et al., 2009). ...
... Until now, in the tax morale literature, and to explain institutional asymmetry, exploratory analyses have evaluated the influence of a range of variables, including trust in government and the judiciary, the level of perceived corruption, dissatisfaction with public services and national pride (Daude et al., 2013;Lago-Peñas and Lago-Peñas, 2010;Torgler, 2004;. The finding is that tax morale increases with trust in government and the judiciary, lower levels of perceived corruption, satisfaction with public services and national pride. ...
... The finding is that tax morale increases with trust in government and the judiciary, lower levels of perceived corruption, satisfaction with public services and national pride. Other country-level variables investigated, albeit by fewer studies, include trust in others to obey the law (Dong et al., 2012;, social security expenditure (Kanniainen and Pääkkönen, 2009) and tax rates Lago-Peñas and Lago-Peñas, 2010;. The finding is that lower tax morale is associated with a lower trust in others to obey the law, lower levels of social expenditure and lower tax rates. ...
... The focus on tax morale has two additional advantages. Firstly, it challenges mainstream economic theory by arguing that the probability of audits and the degree of punishment do not fully explain tax evasion (Filippin et al., 2013;Lago-Penas and Lago-Penas, 2010;Torgler, 2005). Secondly, it embraces the institutional economic view according to which social and economic exchanges do not occur outside the moral sphere (Traxler, 2010). ...
... In other words, cultural values, which partly shape individual values, are important informal institutions explaining how formal rules are followed in practice (Williamson, 2009). In fact, empirical studies show that tax evasion not only varies across countries, but also across different regions subject to the same national government system (Lago Penas and Lago Penas, 2010;Torgler, 2005). Appropriate institutions should reduce rent-seeking problems, since institutions are set of norms and rules able to shape and constrain human behaviours (Hodgson, 2006;North, 1990, Ostrom, 2010. ...
Article
Citizens' tax compliance should not only respond to the quality of formal institutions, but might also be culturally driven. We contribute to this literature by investigating whether tax morale, an individual's intrinsic non-pecuniary motivation to comply with taxes, is associated with the cultural values (following Hofstede's typology) held by this individual. The analysis exploits four waves of the European Values Survey (1981–2010) across 48 countries. The cultural dimensions are constructed through a polychoric principal component analysis on a set of relevant survey items consistent with Hofstede's definitions. Ordered logit estimations suggest that although values of individualism and femininity are associated with higher individual's tax morale, power distance and uncertainty avoidance are associated with lower tax morale. These results remain consistent as we increase the level of granularity of our investigation through within-region analyses and, subsequently, within-cohort analyses. We argue that these results inevitably enrich the emerging debate about cultural values and citizens' compliance with formal institutions. They also indicate that societal culture as well as individual values should be considered when designing policies aiming to improve tax compliance.
... Cultural aspects that affect tax morale in tax evasion have also been studied by Alm & Martinez-Vazquez (2007), Alm & Torgler (2006), Basri (2016), Bosco & Mittone (1997), Brink & Porcano (2016), Cummings et al. (2009), Deyneli (2014a), Halla (2012), Lago-Peñas & Lago-Peñas (2010), Li (2010), McGee & Benk (2011), Nerre (2006), Nickerson et al. (2009), Richardson (2008), Torgler & Schneider (2009), and Tsakumis et al. (2007). The culture in question is demographic factors, culture in various countries, power distance, and masculinity. ...
... Cultural differences can affect different tax morals. Tax morals based on culture can affect tax evasion (Alm & Martinez-Vazquez, 2007;Alm & Torgler, 2006;Bosco & Mittone, 1997;Brink & Porcano, 2016;Cummings et al., 2009;Deyneli, 2014b;Goerke, 2015;Lago-Peñas & Lago-Peñas, 2010;Nerre, 2006;Richardson, 2007;Torgler & Schneider, 2009;Tsakumis et al., 2007). According to Bertens (2002), morality is an awareness of good and bad. ...
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This study aims to analyze the effect of tax morale in the Tri Hita Karana perspective and tax framing on tax evasion. The experimental design is a 2×2 between-subject which are 56 taxpayers of the Balinese people who live in Palu City, Indonesia. The tax framing variable is manipulated with positive and negative framing scenarios. Each taxpayer determines the amount of income is reported. If the taxpayer reports that his income is getting closer to the real thing, then it is stated that he is doing a lower tax evasion and vice versa. The test results indicate that in the perspective of Tri Hita Karana, taxpayers with high tax morale undertake lower tax evasion than taxpayers with low tax morale. This study also found that taxpayers with positive framing treatment performed lower tax evasion than taxpayers with adverse framing treatment. The results of this study provide evidence that increasing taxpayer compliance and reducing tax evasion can be done with high tax morale internalized in the Tri Hita Karana culture and framing information positively.
... Los contribuyentes asalariados o dependientes muestran un cumplimiento tributario mayor, debido que los impuestos son deducidos en origen y, por lo tanto, no tienen otra opción que no sea cumplir. En cambio, los contribuyentes no asalariados (empresarios, rentistas, profesionales independientes y trabajadores informales), a menudo, tienen la posibilidad de decidir si cumplen o no con la obligación tributaria (Lago-Peñas y Lago-Peñas, 2010;Saad, 2012). ...
... Por otro lado, el nivel de dependencia de los ingresos de un empleador (asalariado frente a cuenta propia o empresarios) favorece el cumplimiento tributario, a menudo, no voluntario (Lago-Peñas y Lago-Peñas, 2010;Saad, 2012;Hofmann, 2017). ...
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Este trabajo analiza la relación entre el cumplimiento tributario en América Latina y los determinantes personales e institucionales de la probabilidad de incumplimiento tributario. Así, el principal logro de este estudio es el análisis de los factores socioeconómicos, demográficos e institucionales que modifican la probabilidad de no cumplimiento. La metodología empleada es un modelo de elección binaria Probit con indicadores construidos con ACM. A pesar de que el trabajo no se centra en discutir la confianza de las instituciones, un importante resultado es la formulación de la conjetura sobre el concepto de credibilidad respecto a la confianza en las instituciones en América Latina.
... Although still not fully understood (which particularly applies to the hereditary context), evidence suggests that tax morale is a dynamic feature heavily influenced by vertical trust (i.e., trust in the state institutions), horizontal trust (trust in other taxpayers), and various personal characteristics. For instance, it was shown that men generally express lower intrinsic readiness to pay taxes than women, and the same applies to younger individuals compared to more experienced ones (Alm and Torgler 2006;Lago-Peñas and Lago-Peñas 2010). The importance of religion in one's life, marital status, size of the family, the level of education, and occupation are also some of the key facets in this respect (Benk et al. 2016;Lago-Peñas and Lago-Peñas 2010;Strielkowski and Čábelková 2015). ...
... For instance, it was shown that men generally express lower intrinsic readiness to pay taxes than women, and the same applies to younger individuals compared to more experienced ones (Alm and Torgler 2006;Lago-Peñas and Lago-Peñas 2010). The importance of religion in one's life, marital status, size of the family, the level of education, and occupation are also some of the key facets in this respect (Benk et al. 2016;Lago-Peñas and Lago-Peñas 2010;Strielkowski and Čábelková 2015). ...
Article
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It is nowadays widely understood that undeclared work cannot be efficiently combated without a holistic view on the mechanisms underlying its existence. However, the question remains whether we possess all the pieces of the holistic puzzle. To fill the gap, in this paper, we test if the features so far known to affect the behaviour of taxpayers are sufficient to detect noncompliance with outstanding precision. This is done by training seven supervised machine learning models on the compilation of data from the 2019 Special Eurobarometer on undeclared work and relevant figures from other sources. The conducted analysis not only does attest to the completeness of our knowledge concerning the drivers of undeclared work but also paves the way for wide usage of artificial intelligence in monitoring and confronting this detrimental practice. The study, however, exposes the necessity of having at disposal considerably larger datasets compared to those currently available if successful real-world applications of machine learning are to be achieved in this field. Alongside the apparent theoretical contribution, this paper is thus also expected to be of particular importance for policymakers, whose efforts to tackle tax evasion will have to be expedited in the period after the COVID-19 pandemic.
... cal attitudes. Research demonstrates that female taxpayers are more compliant (e.g. meta-analyses by Hofmann et al., 2017) and display higher morale than males (e.g. Alm & Torgler, 2006;Williams & Krasniqi, 2017). There is also a positive relation between age and tax compliance (Hofmann et al., 2017) as well as tax morale (e.g. Alm & Torgler, 2006;I. Lago-Peñas & Lago-Peñas, 2010) although Williams and Krasniqi (2017) reveal an inverted U-shape relationship among the variables. ...
... k, Lockart, and Robinson (2020) find that the association between tax avoidance and inside debt is more significant for the CFO than for the CEO. Source of income also plays an important role. Selfemployed exhibit lower tax morale as self-employment requires reporting of income and may open opportunities to evade taxation (e.g. Alm & Torgler, 2006;I. Lago-Peñas and Lago-Peñas, 2010;Hashimzade, Myles, & Tran-Nam, 2012;Williams & Krasniqi, 2017). Is also turns out that some income sources, such as from agriculture or services are more prone to tax evasion (Richardson, 2006). ...
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Rapid economic and social changes, globalization, digitalization, new business models and taxpayers' mobility are just few reasons that forces fiscal authorities worldwide to give even more focus on the efficiency of their tax systems, on strengthening the tax discipline and efficient use of fiscal resources. Tax evasions and frauds, tax avoidance and weak tax discipline along with the requirements for higher fairness and transparency of taxation pose new challenges to the governments and their tax authorities and demand efficient and innovative ways of collecting the taxes. As willingness to pay taxes is linked to a set of complex mechanism and interwoven factors, several countries strengthen their control mechanisms as well as study alternative ways to improve tax compliance and increase tax morale that are based on education, training and information for taxpayers, especially young people. In our paper we explore the impact of short educational programmes on taxation and benefits of tax-financed welfare state on indicators of stated tax morale and tax compliance of pupils in primary and secondary schools. The results of our hierarchical models on a set of individual and contextual level variables, based on 4926 respondents, show that tax morale of Slovenian primary and secondary school pupils slightly declines with age, educational background in the household are strongly linked to a tax morale of pupils, household affluence have negative impact on tax compliance of pupils and attendance of programs significantly increased the tax morale and the tax compliance. Our findings can help the governments, tax authorities and designers of educational programs to inform and educate current and future taxpayers and hence strengthen the tax culture in their respective countries.
... En segundo lugar, y respecto a los componentes del capital social, si bien la confianza en las instituciones se muestra como significativa al 1% con un signo positivo esperado en los cuatro modelos presentados, la variable que alude a las normas sociales aparece como significativa en los tres primeros modelos con distintos niveles de significación, mientras que la pertenencia a asociaciones políticas no resulta significativa en ninguno de los modelos planteados. Estos resultados se encontrarían en concordancia con la mayor parte de los estudios que relacionan cumplimiento tributario con confianza institucional Lago-Peñas y Lago-Peñas, 2010;Torgler, 2003) y normas sociales (Alm et al., 1999;Azar et al., 2010), al observarse una relación positiva entre éstos y la moral tributaria de los contribuyentes. ...
... En tercer lugar, y en lo que respecta al resto de variables de control, tres de éstas aparecen con niveles de significación en los cuatro modelos planteados -una mayor obediencia declarada hacia las leyes y normas fiscales, un mayor nivel de estudios, y una mayor edad se relacionan con una mayor conciencia fiscal-, encontrándose en la línea de estudios previos (Alarcón et al., 2016;Azar et al., 2010;Giachi, 2014;Kirchler, 1999;Lago-Peñas y Lago-Peñas, 2010;). Por otro lado, la variable relativa a la religiosidad se muestra como significativa, aunque, no obstante, refleja un signo contrario al esperado y, si bien existen evidencias de una relación negativa entre la moral tributaria y la religiosidad (Azar et al., 2010), se trata de casos muy aislados. ...
Article
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Practically, most of the studies on tax compliance and citizen participation have limited to analyze the effect of residing in direct democratic regions on tax attitudes. However, these studies leave aside the individual participation itself, in other words, they consider the existence of the opportunity to participate. The present work aims to take a step forward by providing new empirical evidence about individuals participation. Based on a sample of 530 observations obtained through a questionnaire and using a discrete probit type election model, it is concluded that individuals who participate actively in public life show greater fiscal awareness than the rest.
... First, the literature on family ties and social capital, which suggests that the strength of family ties is negatively correlated with the quality of social capital, trust in public institutions, political participation, and economic outcomes (see, among the others, Banfield (1958), Fukuyama (1995), Putnam (1993), Bisin and Verdier (1998, 2000, 2010, Alesina andGiuliano (2010, 2011), Guiso et al., 2006Guiso et al., , 2007Guiso et al., , 2010. Second, the literature on tax morale and tax evasion which shows that the level of tax evasion is higher where the level of tax morale and citizens' ethics is lower (see, among others, for example, Torgler and Schneider (2006, 2009), Torgler (2003, 2004, 2006, 2007, Alm and Torgler (2006), Feld and Torgler (2007), Frey and Torgler (2007), Lago Penas and Lago Penas (2010), Alm et al. (2006), Alm and Martinez-Vasquez (2007)). ...
... Lago Penas and Lago Penas (2010) show that tax morale in European countries varies regularly with socio-demographic characteristics, personal financial experiences, political attitudes, and regional GDP, in addition to some ethnic and linguistic fractionalizations. Torgler (2006) also addresses the role of religion in shaping moral value and tax morale and, therefore, tax evasion. ...
Article
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This paper reports empirical evidence supporting the hypothesis that family ties should be considered among the main determinants of tax morale, underground economy and trust. In societies where the power of the family is very high, the quality of public institutions tends to be low. This connection shapes the behavior of taxpayers and tends to increase the underground economy. The econometric analysis is based on linear panel data models and a new original dataset that puts together data on personal values, social capital and tax morale, in combination with an index of the shadow economy. The final results show that in countries where family ties are stronger, the level of trust and tax morale is lower, while underground economy is higher.
... The heterogeneity among them must be acknowledged in explaining individuals' tax compliance behaviours. Indeed, many empirical studies show that tax compliance behaviour varies across citizens depending on their demographic attributes and socioeconomic characteristics, including age, gender, income, and education (Kastlunger et al. 2010;Lago-Penas and Lago-Penas 2010;Russo 2013;Brockmann et al. 2016;Hofmann et al. 2017), culture (Alm and Torgler 2006;Kountouris and Remoundou 2013), employment status and religion (Lago-Penas and Lago-Penas 2010), and trust in and perceptions of government (Kirchler et al. 2008;Kogler et al. 2013;Jimenez and Lyer 2016;Batrancea et al. 2019;D'Attoma 2020). ...
Article
Identifying taxpayers who engage in noncompliant behaviour is crucial for tax authorities to determine appropriate taxation schemes. However, because taxpayers have an incentive to conceal their true income, it is difficult for tax authorities to uncover such behaviour (social desirability bias). Our study mitigates the bias in responses to sensitive questions by employing the list experiment technique, which allows us to identify the characteristics of taxpayers who engage in tax evasion. Using a dataset obtained from a tax office in Jakarta, Indonesia, we conducted a computer-assisted telephone interviewing survey in 2019. Our results revealed that 13% of the taxpayers, old, male, corporate employees, and members of a certain ethnic group had reported lower income than their true income on their tax returns. These findings suggest that our research design can be a useful tool for understanding tax evasion and for developing effective taxation schemes that promote tax compliance.
... В создании такой среды, основанной на доверии ее участников, важную роль играют формальные институты, т. е. действия органов государственной власти должны поддерживаться гражданами и восприниматься как эффективные, что положительно влияет на уровень доверия налогоплательщиков к власти и их готовность соблюдать законодательство. При этом влияние доверия изучается по следующим направлениям: доверие к правительству [18], доверие к парламенту и политическим партиям [19], доверие к суду и правовой системе [20], доверие к налоговым органам и должностным лицам [21], доверие к политикам [22], доверие к органам внутренних дел [23], доверие к Евросоюзу [24]. ...
Article
The evolution of views on tax evasion following the introduction of limited rationality and social and psychological factors into the models of taxpayer behavior has increased the plausibility of the initial assumptions of the models, but it has made it difficult to use classical approaches based on the search for equilibrium states. The variety of behavioral responses of taxpayers due to the many factors that influence their choice has led to the fact that tax evasion has come to be considered as the result of nonlinear and dynamic interactions between the state and taxpayers. In such models, small short-term external influences can act as shocks, which leads to the emergence of a wide range of different long-term trends, the analysis of which within the framework of traditional approaches is difficult. In this regard, the purpose of this review study is to study the evolution of views on the behavior of taxpayers that has led to the emergence of new approaches to modeling tax evasion where the key role is assigned to the analysis of the impact of external shocks of various scales and nature. The research hypothesis is that modern approaches to the study of tax evasion problems make it necessary to consider the interaction of the state and taxpayers within the framework of the theory of non-equilibrium and nonlinear systems in which minor external influences can play the role of shocks, and the most promising direction of their study is the use of agent-based modeling tools. The results of the study confirm that the use of agent-based models is a promising approach for integrating existing approaches in the study of tax evasion processes. The proposed concept of building an agent-based model for analyzing the processes of tax evasion allows us to answer the question of how short-term exogenous shocks will affect the preferences of taxpayers, taking into account their individual characteristics and accepted behavioral patterns in society.
... A consistent finding in this literature is that trust in government positively affects individuals' willingness to comply with their tax obligations. In particular, higher trust in the country's legal system, the government, and the parliament, have all been found to increase individual tax morale (Torgler, 2003a(Torgler, ,b, 2005Cummings et al., 2004;Alm and Torgler, 2006;Torgler and Schneider, 2007;and Martinez-Vazquez and Torgler, 2009;and Lago-Peñas and Lago-Peñas, 2010) Other factors such as upholding religious beliefs, support for democracy, and pride in one's national origin also have been found to influence tax morale in a positive way (Torgler 2005b(Torgler , 2006. Orviska and Hudson (2003) emphasize the roles of civic duty and 'law abidance' in deterring tax evasion. ...
... Moreover, an important experimental literature has studied the role of many of the determinants and characteristics evoked above, especially through its effect on 'tax morale' (see Alm and Malézieux 2021 for a meta-analysis of these results). The determinants of tax morale, a person's intrinsic motivation and inclination to pay taxes (Torgler 2007) have been widely explored (Hofmann et al. 2008;Lago-Peñas and Lago-Peñas 2010;DeBacker et al. 2015;OECD 2013;Luttmer and Singhal 2014, inter alia). In countries with low tax morale, taxpayers view cheating on their taxes as acceptable as they observe others evading and consider this to be rational and justifiable. ...
Article
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This study reports on the impact of exposure to tax dilemmas on tax morale. We focus on young adults in their “impressionable years” and with little or no previous tax exposure in order to estimate the impact of actual (albeit experimental) exposure to tax dilemmas on their self-declared tax morale. First, we ascertain the participants’ (N = 385), representation and attitudes towards tax, and second, we observe the impact of facing tax decisions on their present and future level of tax compliance. This allows us to investigate, in the realm of taxation, the generic question of knowing how one’s history (and one’s decisions) influences one’s ethical representations and attitude. Although of less external validity than studies using naturally occurring events or historical periods, the use of an experimental simulation enables us to investigate the three different dimensions that could shape people’s personal history: acting, experiencing and observing. Thanks to an interactive and systemic approach, participants are invited to make decisions in a tax context, to experience tax “events” and are given the opportunity to observe both their own behavior, that of others as well as the consequences of those actions, and repeat and test those three different steps several times. We find that the simulation tends to reduce honesty and ethical concerns with respect to taxation, a decrease in tax morale. This reduction seems to be driven by those subjects who were actually facing a tax dilemma and have to make a compliance decision. Other subjects, only observing or experiencing the effects of low tax compliance, are only marginally affected. One possible interpretation is that individuals have an initial overconfidence in their propensity to tax compliance and tax morale, which is challenged by their own decisions in typical dilemmas.
... Özellikle vergi sisteminin karmaşık yapısı, vergi kaçırma üzerindeki en önemli faktör olarak değerlendirilirken eğitim, gelir kaynakları, adalet ve vergi ahlakının da etkili olduğu tespit edilmiştir. Vergi ahlakını etkileyen faktörlerin AB ülkeleri üzerinde araştırıldığı bir diğer çalışmada ise, vergi ahlakının sosyo-demografik özellikler, kişisel finansal deneyimler ve siyasi tutumların yanı sıra GSYİH ve vergi düzenlemeleri ile yakın ilişkili olduğu, ülkeler arası farklıların ise yoğun olarak etnik fraksiyonlardan kaynaklandığı belirlenmiştir 15 vergi ahlakına yönelik soruların yüksek oranda olumlu sonuçlar verdiği ancak diğer taraftan vergi ile sunulan kamu hizmeti ilişkisinin tam olarak kurulamadığı, vergi oranlarının mükelleflerin vergi algılarını doğrudan etkilediği gibi sonuçlara ulaşılmıştır. ...
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Vergi algısı, toplumların vergiye olan bakış açılarını yansıtmakla birlikte, genel olarak kamusal ilişkiler hakkında da ipuçları vermektedir. Bu bağlamda çalışma, Türkiye’de mevcut vergi algısını, ayıp, günah ve suç kapsamında incelemektedir. Çalışmada kullanılan veri seti, KONDA tarafından 2017 yılında gerçekleştirilen “Ayıp, Günah ve Suç Algısı” araştırmasından elde edilmiştir. Betimleyici yöntemin kullanıldığı çalışma sonucunda, Türkiye’de toplumsal ilişkilere yönelik kamusal algının, yüksek hassasiyete sahip olduğu, özellikle vergi usulsüzlüklerinin toplumda hoş karşılanmadığı ve bu tür davranışların ayıp ya da günah olarak nitelendirildiği belirlenmiştir.
... The literature has identified local institutions as an important driver of citizens' tax compliance norms (see, e.g., Hofmann et al. 2008;Lago-Peñas and Lago-Peñas 2010;Halla 2012;Belmonte et al. 2018). However, most of these studies are based on evidence from developed countries or developing countries outside of Africa. ...
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The paper examines the legacy of pre-colonial centralization on tax compliance norms of citizens in contemporary Uganda. By combining geo-referenced anthropological data on pre-colonial ethnic homelands with survey data from several rounds of the Afrobarometer Survey, respondents from the historically centralized homelands are found to exhibit a higher willingness to pay tax compared to respondents from non-centralized areas. The result holds for the whole sample and in the regression discontinuity analysis on individuals who reside close to the borders of neighbouring ethnic homelands with different levels of pre-colonial centralization. The stronger norm for tax compliance in pre-colonial centralized homelands is explained by the legacy of location-specific factors related to the level of capacity that historically centralized states had in upholding authority and not through the legacy of better-quality local institutions.
... Whereas erstwhile studies in this literature argue that the decision to evade tax is 5 primarily driven by extrinsic, pecuniary factors (Allinghan & Sandmo, 1972;Srinivasan, 1973;Yitzhaki, 1974;Dhami, & al-Nowaihi, 2007;Litina & Palivos, 2016) 4 , advances in the literature have also underscored the pivotal role of non-pecuniary factors. Particularly, more recent studies have shown that personal and social norms (e.g., see Wenzel, 2004;2005;Alm & Torgler, 2006;Traxler, 2010;Kountouris & Remoundou, 2013;Blaufus et al., 2016) 5 , one's valuation of public goods provision or the quality of governance (Fjeldstad & Semboja, 2001;Torgler, 2005a;Torgler, 2005b;Cummings et al., 2009;Lago-Penas & Lego-Penas, 2010;Ali et al., 2014) and social and demographic factors (e.g., see Torgler, 2006;Alm & Torgler, 2006;; Rodriguez-Justicia & Theilen, 2018) 6 . Our paper contributes to this literature by showing how external factors can interact with domestic factors to induce tax-behavioral changes. ...
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We explore the heterogeneous effect of migrant remittances on citizens' support for taxation using a sample comprising 45,000 individuals from the Afrobarometer survey round 7 [2016-2018] across 34 African countries. To correct for unobserved heterogeneity, we endogenously identify latent classes/subtypes of individuals that share similar patterns on how their support for taxation is affected by their unobserved and observed characteristics, including remittances dependency. We apply the finite multilevel mixture of regressions approach, a supervised machine learning method to detect hidden classes in the data without a priori assumptions on class/subtype membership or how remittance dependency affects support for taxation across the classes. Our data is best generated by an econometric model with two classes/subtypes of individuals. In class 1 where more than two-thirds of the citizens in our sample belong, we do not find any significant evidence that remittance dependence affects support for taxation. However, in class 2 where the remaining one-third of the citizens belong, we find a significant negative effect of remittance dependence on support for taxation. We further examine whether citizens' valuation of the quality of public services is an important factor in determining the classification of individuals into classes. We find that citizens who have a positive appraisal of the quality of the public service delivery have a lower probability of belonging to the class/subtype in which depending on remittances reduces support for taxation.
... Відповідно до теорії податкової моралі рівень тінізації економіки залежить, в першу чергу, не від економічних показників розвитку країни, а від того, які моральні норми превалюють в країні. Емпіричні дослідження, що проводилися прихильниками даної теорії показали, що найнижчий рівень податкової моралі спостерігається серед одиноких людей, безробітних і самозайнятих [1,21,14,11]. В той же час її рівень зростає пропорційно до зростання рівня релігійності в країні, віку економічних суб'єктів, покращення їх соціального статусу та доходу. Для США та країн Європи спостерігається статично значимий на рівні 0,5% негативний коефіцієнт кореляції між рівнями податкової моралі та тінізації економіки (-0,46), для країн з транзитивною економікою --0,657 на рівні 0,1%. ...
Article
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Chapter
Traditionally, research focuses on individual taxpayers that—when faced with a decision under uncertainty—are assumed to maximize their profits through rational decision processes. However, economic psychology and behavioral economics reveal several anomalies where the observed effects are opposite to the theoretical predictions. Moreover, psychological research provides evidence for the importance of factors such as the understanding of the tax law, attitudes toward taxes and tax morale, personal and social norms, and perception of distributive and procedural justice. In this paper, we provide a review of the research on tax compliance decisions. We address traditional approaches to study compliance decisions and anomalies as well as the psychological determinants of compliance. Since different research methods reveal different results, we describe the arsenal of research methods and their strengths and weaknesses. We pay specific attention to results from process tracing approaches in tax compliance research. We conclude with practical implications for policymakers and researchers in the field.
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By relying on WVS data and using multilevel mixed modeling, the paper tests the hypothesis that access to larger flows of information about government fiscal accounts and financial transactions increases citizens’ willingness to pay taxes. By supporting such an hypothesis, our analysis suggests that in the presence of more information, the implicit contract between the government and taxpayers displays less stringent incentives and participation constraints and causes part of the contract, namely tax morale, to be enhanced. This finding supports the implementation of fiscal transparency policies, whose possible design is discussed.
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We study the effects of tax morale and social norms on tax evasion when individuals interact in a network. We present a model that incorporates incentives for tax compliance in the form of punishment and fines, tax morale, and reputation for social behaviour. We assume that individuals adjust their tax morale by observing the neighbours' tax morale. We simulate the model for different values of the parameters and show that the steady-state share of taxpayers as opposed to tax-evaders is affected by the probability of finding like-minded peers in the reference group (network integration), the weight that individuals attribute to reputation, and the share of individuals who update their tax morale. Last, we consider the possibility of a fiscal authority using the knowledge of the network structure and targeting ‘central’ individuals. We show that by positively affecting the tax morale of individuals whose influence within the network is high, a fiscal authority can increase tax compliance.
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Low tax morale is associated with domestic tax evasion. We find evidence of cross-border equity flows designed to evade taxes in low tax morale countries. Using Foreign Portfolio Equity Investment (FPI) flows into 21 OECD countries from 138 source countries and an index of tax morale from the World Value Survey (WVS), we show that individuals in countries with low tax morale engage in tax evasion via roundtripping through tax havens. This allows them to benefit from differential taxes applied to foreign investors vis-a-vis domestic investors. Our results remain robust to various measures of tax morale and distinct subsamples.
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Students are the future taxpayers that will contribute significantly to nation-building. Thus, education at the secondary and tertiary level is the essential time to educate them in tax matters for their transition to the job market. The transition will shape their perception of tax-compliant culture. Malaysia's enforcement authority, Inland Revenue Board (IRB), perceives students as the human capital and future leader for the country. They must be nurtured by giving them the right exposure at the early stage to prevent them to shun away from their responsibilities to society. Therefore, this study will examine the determinants of students' perception of tax morale among the accounting and non-accounting students. The study used adapted survey questionnaire from the previous literature using the data collected from undergraduate UiTM students. The data are measured against a four-point Likert scale. The findings show that tax rate, fair tax system, government spending, corruption in government, taxpayer financial constraints and religion influence the student's perception on the level of tax morale. The study contributes the knowledge in the current body of literature on tax morale and tax compliance. The finding will provide an insight as to why society considers it ethical not to pay taxes.
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Purpose The purpose of this paper is to estimate tax evasion and its impact on progressivity, redistribution and the measurement of inequality, using microdata from the Spanish income tax for 2001-2004. Design/methodology/approach The approach follows Feldman and Slemrod (2007) by exploiting the relation of charitable donations with the composition of income but introduces two methodological innovations, which could be useful for further studies: correction for sample selection with a Heckman two-step setting and the calculation of different evasion rates for top incomes with an interaction term. Findings Evasion in capital incomes was significant throughout these years. Financial incomes were reported at around 50-70 per cent of their real value, with the lowest estimates corresponding to the top decile. Revenues from fixed capital display similarly low compliance rates for the top 10 per cent. Tax evasion in self-employment incomes (direct assessment) is estimated at 20 per cent for 2001. Mostly because of a composition effect, this means that fraud was higher at the top of the income distribution, thus having a regressive impact. Inequality statistics and top income concentration estimates should, therefore, be revised upwards. Originality/value This is the first paper to estimate the distributive impacts of tax evasion in Spain, and one of very few internationally.
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After the negative effect of the recent financial crisis on public finances in many countries, it is of a great interest to study attitudes towards taxation to identify effective policies to enhance public support for taxation and welfare programs. In this paper, we analyze empirically people’s attitudes towards taxation in European countries. In particular, we test whether the perception about benefit fraud may produce different effects on preferences over the size of the welfare state along the income distribution. Moreover, we test if contextual variables are relatively more relevant than individual characteristics in determining attitudes towards taxation. Using different data sources for many EU countries in 2008, we contrast those hypotheses taking advantage of multilevel techniques. Our results suggest that policies targeting the deterrence of benefit fraud such as higher penalties and more frequent benefit investigations, increase the high earners’ willingness to pay taxes and then the size of the welfare state. We also find that contextual characteristics explain a larger variance of attitudes toward taxation than individual characteristics, suggesting that the same policy for all UE countries might be not a good strategy.
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We use administrative tax data from audits of self‐assessment tax returns to understand what types individuals are most likely to be non‐compliant. Non‐compliance is common, with one‐third of taxpayers underpaying by some amount, although half of aggregate under‐reporting is done by just 2% of taxpayers. Third party reporting reduces non‐compliance, while working in a cash‐prevalent industry increases it. However, compliance also varies significantly with individual characteristics: non‐compliance is higher for men and younger people. These results matter for measuring inequality, for understanding taxpayer behaviour, and for targeting audit resources. This article is protected by copyright. All rights reserved
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Purpose of the study: This article aims to analyze the effect of eight independent variables (happiness, level of welfare, electoral participation, sex, age, marital status, type of residence, and level education) on tax compliance in Indonesia. Methodology: The cross-sectional study data came from the 5th wave of the Indonesian Family Life Survey (IFLS 5) produced by Rand Corporation, Ltd, United States, in 2014-2015. The total sample of IFLS 5 reached 16,204 households and 50,418 individuals as household members. IFLS 5 respondents are household heads, spouses of heads household, and household members aged 15 years old or older who can provide information about the characteristics of household members. This article applies logistic regression using STATA 15 to analyze the IFLS 5. Main Findings: The result of logistic regression shows that of the eight independent variables identified as predictors of tax compliance (Y), only five independent variables (p<0.01) significant affect tax compliance (Y) with a contribution as much as 128.1% (electoral participation/X8), 61.1% (welfare/X2), 54% (happiness/X1), -37% (age/X3), 17.9% (education level/X7). Among these five independent variables, only the age (X3) has a negative relationship with tax compliance (Y), while the other independent variables have a positive relationship. This final model can explain tax compliance (Y) of 0.0275 or 3% significantly, X2 (5) = 459.46, p<0.01. Applications of this study: This article recommends that the government intervene in various sectors of social development, increase tax literacy, expand access to higher education, and improve the quality of the democratization process to increase tax compliance in Indonesia. Novelty/originality of this study: This article brings new evidence on the relationship between happiness, welfare, electoral participation, age, and education level on personal tax compliance.
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The Belt and Road Initiative project of China has been receiving some criticisms on both economic and geopolitical manners. According to them, China aims to dominate debtor countries by giving huge loans that they cannot handle and outmaneuver its rivals economically and geopolitically. Yet, on the other hand, some advocate that China is pursuing its economic interests and blooming economic ties among member countries within the context of the Belt and Road Initiative. We, therefore, investigate whether China aims to ensnare countries and seize debtor countries’ assets by driving them into higher debt repayments. In doing this, we benefited from The China Global Investment Tracker showing approximately 3,500 transactions along with different sectors, as well as the extant literature including a two-way approach to understand how China managed the process of Belt and Road projects. However, China does not properly report the terms and conditions of credits provided under the Belt and Road Initiative. This requires further data collection and matching puzzle pieces of both literature and data extracted from the tracker and other available sources. Overall, it is possible to identify one key finding: claims regarding China’s Belt and Road project seem futile, that is, no “economic statecraft” has been detected, but should be tracked in the medium- and long-term period as the concept of Belt and Road Initiative is rather new and remains tentative.
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This paper analyzes whether the belief that immigrants represent a threat to welfare sustainability relates to citizens’ willingness to pay taxes. We approach this question using individual-level data from the 4th and 5th waves of the European Values Study (EVS). We find lower levels of tax morale among citizens who believe that immigrants are a strain on the welfare system. This suggests the possibility that the belief that immigration erodes the welfare system could become a self-fulfilling prophecy. Moreover, our results reveal substantial cross-regional heterogeneity and that prejudices play a role in belief formation, issues that deserve the attention of scholars and politicians.
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Tax revenue is a main source of income to government and is used for various public services and essentials. Taxes generally are perceived as a burden to taxpayers, so tax evasion is a universal phenomenon that governments facing in the world. Malaysia is in the fiscal deficit situation and it became worse during the Covid-19 pandemic. It is important to increase tax revenue as it would help to reduce the fiscal deficit. This study looks into how ethical perception of individual taxpayers to be influenced by their education level and hence further influence their tax compliance behaviour. The researcher used cross-sectional survey design to collect data at one point in time. This study using Statistical Package for the Social Science (SPSS) version 21 to analyse the data in order to obtain meaningful information. Based on 606 respondents in Peninsular Malaysia, the study indicates that ethical perception has a positive significance impact on tax compliance behaviour. The results also highlight a significant positive relationship between ethical perception and tax compliance behaviour when moderated by education level. It means education level will enhance ethical perception of individual taxpayers, hence they will be more compliant. Based on this findings, government can improve further their existing policies to make sure high tax compliance in future.
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It is extremely important for tax compliance to fulfill their tax obligations on time and completely by taxpayers. Various regulations are made in order to increase tax compliance in the legislation of many countries. One of the these regulations was accepted for this purpose in Turkish Tax Law in 2016 is the institution of Invitation to Explanation. This study was written in order to evaluate whether the institution in question serves this purpose. In this study, the effect of the institution of invitation to explanation on tax compliance in the light of the survey data made to 300 people consisting of Sworn-in Certified Public Accountants, Certified Public Accountants and accounting professionals in Denizli province in Turkey; Factor analysis was applied within the framework of three variables: tax compliance, institution of invitation to explanation and trust to the institution of invitation to explanation.
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This paper studies the effects of mobilization for war on the development of fiscal capacity and the values of tax compliance (tax morale). We propose a dynamic setting where governments may invest resources to improve the efficiency of the fiscal apparatus and the citizens' tax morality in order to raise the necessary revenues for the defense against a threat (external or internal), and parents optimally choose to transmit their preferences of tax compliance to children. Despite fiscal capacity and tax morale are initially substitutes, we show how a dynamic complementarity may arise in equilibrium from a more efficient transmission of the values of tax compliance in countries with high fiscal capacity, and this may explain why they tend to move together over time. Under reasonable conditions, we obtain that the effect of a higher threat of war on the steady‐state level of the culture of tax compliance is negative when fiscal capacity is relatively low, and positive when the latter is large. We show cross‐country evidence based on war frequency, fiscal capacity, and tax morale that is consistent with the results of our theory.
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The purpose of this study is twofold. Firstly, we aim to examine the conceptual and theoretical framework of the pink tax. In this context, we also observed trends in the literature regarding the pink tax. Secondly, we compared the prices of men's and women's products that we collected from various shopping sites in order to analyze the aforementioned trend in Turkey. Data obtained from various shopping sites, including 300 products, comprising 150 female products and 150 male products, which are priced differently for male and female consumers in Turkey, have been categorized and a price comparison has been made among genders. In 17 of the 21 categories reserved by us, while the prices of products for women's consumption are higher than men's, adult trousers, adult t-shirts, and adult and children's socks have higher prices for men's products. According to the results obtained within the scope of the research, it is found that women's products are put on the market at prices 7.4% higher than men's, on average. Therefore, we have determined pricing that may be to the disadvantage of women in Turkey as well as in the literature.
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At the present time, information is spreading quickly via different channels like smartphones, electronic mails, so on. Accesing to information has become easir than previous centuries. In the literature there has not reached a consensus whether information is accepted as a public good. Nevertheless, information shows some public goods characteristics in the way of impossibility of the deprivation of its consumption from time to time, and not having competition in its consumption. In this research, the information sharing of 270 public finance scientists analysed by requesting some information about their current studies or a general subject related to the academy, via electronic mail. The information requested and evaluated according to the scoring criteria which is prepared by ourselves. Information sharing was rated between 0 and 100, depending on the answer obtained. When scoring, two criteria; the time period of the requested information, and whether information was shared or not, was taken into consideration As a result of the research, the group who is most willing to share information, and has the highest scoret of 51.4 are teaching assistants; and the group that is least willing to share information, and thus has the lowest score average are professors with the score of 26.
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This dissertation assesses the direct links between fiscal decentralisation, economic growth, and multidimensional poverty; and further explores the indirect links between the two variables through the four pro-poor sectoral outcomes, which include, education, healthcare, agricultural productivity, and infrastructure in Kenya. Our thesis, first, reviews literature related to key components of fiscal decentralisation and multidimensional poverty to develop a solid theoretical model that explains the linkage between the two variables. In this first part, the thesis also discusses the political economy of the link between fiscal decentralisation and multidimensional poverty in Kenya with a focus on the approaches, measurements, and trends of these variables. Owing to the inconclusive nature of the empirical literature on the fiscal decentralisation-poverty nexus, this thesis was motivated to empirically analyse whether there is any significant statistical relationship between fiscal decentralisation and multidimensional poverty in Kenya using FE, RE, and GMM-IV estimations. We used cross-county panel data from 2006 to 2019 published by government agencies, United Nation Development Programme, Society for International Development, World Bank, and other publications to carry out these estimations. These empirical estimations intended to find out the effects of revenue decentralisation, vertical fiscal (im)balances, intergovernmental transfers, and expenditure decentralisation on multidimensional poverty – proxied alternatively by FGT indices (headcount poverty, poverty gap and severity of poverty), food poverty incidence, overall child poverty, Human Development Index (HDI), and Multidimensional Poverty Index (MPI). This research also estimated the effect of fiscal decentralisation on subnational economic growth as an initial and instrumental way through which fiscal decentralisation affects multidimensional poverty. Our estimation results reveal that the impact of fiscal decentralisation on multidimensional poverty measures and economic growth depends on the nature and extent of fiscal decentralisation. Our estimation results on the effect of fiscal decentralisation on subnational economic growth showed that all FD indicators are growth-enhancing but highly dependent on the level of fiscal decentralisation. However, for poverty reduction, on the side of money-metric poverty measures, revenue decentralisation and vertical imbalances were found to reduce poverty headcount at low levels below 61.31 per cent and 53.54 per cent respectively while intergovernmental transfers and expenditure decentralisation were found to increase poverty headcount at low levels below 9.92 per cent and 0.801 per cent respectively beyond which they would reduce poverty headcount. Conversely, on the side of the non-money metric poverty, revenue decentralisation and vertical imbalance were found to increase Multidimensional Poverty Index (MPI) at low levels below 51.94 per cent and 0.955 per cent respectively while intergovernmental transfers and expenditure decentralisation were found to reduce MPI at low levels below 9.07 per cent and 0.811 per cent respectively beyond which they would increase multidimensional poverty. However, there are differences in the effects of fiscal decentralization and multidimensional poverty across regions and counties. Additionally, our results show the major role played by the devolution reforms of 2013 in increasing the overall decentralisation that improved subnational growth and poverty reduction through pro-poor expenditures. Lastly, we empirically explored the indirect channels through which fiscal decentralization affects multidimensional poverty through four sectors (education, basic healthcare, agricultural extension, and infrastructure services) as dictated by the reviewed literature. Here, our results revealed different effects of fiscal decentralisation on pro-poor sectoral outcomes due to the nature and extent of decentralisation in these functions. KEY WORDS: Fiscal decentralization, Devolution, Multidimensional poverty, Local development and governance, Counties, Kenya.
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Purpose This paper aims to investigate the moderating influence of religiosity on the effect of taxpaying attitudes on the tax compliance behaviour of entrepreneurial firms in Nigeria. Design/methodology/approach Using a cross-sectional survey design, we collected primary data from 368 owner managers of entrepreneurial firms in Southwest Nigeria using structured questionnaires. Respondents were purposefully selected based on the purposive sampling technique. The data collected with the structured questionnaires were analysed using descriptive and inferential statistics. Two linear regression models were compared. Findings Estimations in Models 1 and 2 suggest that taxpayers’ attitudes and religiosity (intra- and interreligiosity) have significant effects on the tax compliance behaviour of firms, but the influence of intrareligiosity is insignificant. Estimations in Model 3 suggest that taxpaying attitudes without the moderating influence of religiosity exerted a significant effect on tax compliance behaviour by 13%, while taxpaying attitudes with the moderating influence of religiosity exerted 17%. Estimations in Model 4 suggest that taxpaying attitudes with the moderating influence of the interreligiosity dimension had a more significant contribution to the changes in tax compliance behaviour than the intrareligious dimension. Research limitations/implications From the findings, the following policy implications can be deduced: (i) if taxpayers’ attitudes improved and religiosity was leveraged by the tax authorities, tax compliance behaviour of entrepreneurial firms would be induced in Nigeria; (ii) the consistent positive influence is a strong indication that religious values are critical elements of tax compliance interventions that should be considered by policymakers when designing public policies on tax evasion and avoidance in developing countries. Originality/value We bridge the gaps in the literature because our study affirmed that taxes are religiously driven. In addition, the study validates the applicability of theory of planned behaviour in investigating the moderating influence of religiosity on the causality between taxpaying attitude and tax compliance in the developing context.
Article
Taxes are essential for a government to function correctly, because they fund public services and promote long-term growth in a country. Tax morale is a positive attitude toward taxation shaped by extrinsic and intrinsic motivations, including numerous psychological factors. However, these factors are far from completely clear and a better understanding of what drives tax morale can greatly help governments in the design of tax policies and their administration. In this paper we test the novel hypothesis that life satisfaction is one of the psychological aspects affecting tax morale. Using longitudinal data from the World Value Survey, we show that people more satisfied with their own life show higher tax morale. We also provide evidence on the roles played by confidence in government and people's cultural orientation in shaping the relationship between life satisfaction and tax morale. Our findings support the idea that implementing alternative policies that, directly or indirectly, increase tax morale could be politically relevant for helping governments mobilize adequate resources from taxation, given that tax evasion prosecution is far from perfect.
Chapter
Georgia is said to be one of the countries with the largest informal economies in the world. This is despite the fact that the country is one of the top reformers among the countries of the former Soviet Union in terms of democratization and marketization. Its neighbour Armenia, on the other hand, has been slow with reforms and today remains a more authoritarian country with a less competitive private sector. This chapter seeks to find out whether the difference in the size of the informal economy between the two countries can be attributed to discrepancies between formal and informal institutions. Both quantitative and qualitative secondary data are used to determine the levels of tax morale of small businesses as an expression of diverging formal and informal institutions. The empirical evidence shows larger discrepancies between formal and informal institutions for Armenian than for Georgian entrepreneurs and thus rules out the institutional incongruence hypothesis as a possible explanation for the differences in the size of the informal sectors.
Article
A plethora of evidence can be found in the literature supporting the view that citizens’ trust in the state plays a decisive role in their overall tax compliance. Nevertheless, in Greece, where the consequences of a ten years long economic crisis still exist, the phenomenon of tax evasion is still dealt with traditional enforcement methods like penalties, regular audits, and tax policy. A new conceptual model is proposed and empirically tested using data from 1,014 Greek citizens from fifty areas of Greece. It attempts to examine the combined effect of ten trust-related factors, which are grouped into four dimensions on tax morale (trust in governance quality, trust in principles and institutions, trust in fellow citizens and trust in personal perceptions). The results show that Greek citizens’ trust in tax reciprocity is the factor that mainly affects tax morale, with citizens’ trust in tax authorities and in the institution of democracy closely following.
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Purpose This paper aims to investigate the roles of corruption and tax allocation inefficiency in moderating the effect of tax aggressiveness on sustainable welfare. Design/methodology/approach This research uses a fixed-effect multiple regression analysis for 55,438 firm-year observations covering 22 countries from 2007 to 2017. Findings For less (more) tax-aggressive observations, corruption and tax allocation inefficiency strengthen the negative (positive) effect of tax aggressiveness on sustainable welfare. The results are in line with public choice and functionalism theories that suggest that private investments can increase welfare when governments are dysfunctional. Practical implications This paper shows that the effect of tax aggressiveness on sustainable welfare depends on tax aggressiveness, corruption and tax allocation inefficiency. Social implications This paper implies that governments should reduce their corruption levels and increase tax allocation efficiency because private investments are ineffective in the long run. Originality/value Because of increasing awareness of sustainability issue, sustainable welfare is considered more relevant than traditional welfare. Hence, empirical studies on the effect of tax aggressiveness on sustainable welfare are crucial. This paper adds the literature by combining public choice and functionalism theories to investigate the moderating roles of corruption and tax allocation inefficiency in this issue.
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This paper examines the impact of credit and debit card usage on VAT compliance using annual national level data for 26 European Union countries from 2000 to 2016. Exploiting spatio temporal variation in plastic money use along with an instrumental variables approach, we find that a 1% increase in card payments reduces VAT gaps 0.51 percentage points whereas a 1% increase in cash withdrawals increases VAT gaps by 0.6 percentage points. Our contribution lies in using more adequate measures of VAT compliance gap and in accounting for potential confounders such as the ex-ante enforcement capacity of tax administrations.
Article
Purpose The purpose of this study is to provide insights into the factors affecting the tax morale of workers in the gig economy. Tax morale is defined as the willingness and motivation to comply with tax laws. Design/methodology/approach Data was collected from gig economy workers through a questionnaire survey and analysed using second-generation multivariate analysis (partial least squares-structural equation modelling). Findings The findings reveal that while the extent of the dependency on the gig economy has a positive relationship with tax morale, the level of education has a negative relationship. However, in contrast to reflective moral attentiveness, perceptual moral attentiveness positively influence tax morale. Originality/value As no earlier study has examined factors affecting tax morale in the context of the gig economy, this research will be beneficial to tax authorities and policymakers. This study also offers insights into multidimensional aspects of the tax morale of those working in the gig economy.
Chapter
Profit shifting is defined as the strategic actions taken by MNEs to report lower profits in high-tax countries and more income in low- or no-tax jurisdictions via using target entities, lower-tax entities and/or conduit entities in specific aggressive tax planning structures. As a result, the profits are reported in a jurisdiction different from where the economic value is created, and the tax base of the jurisdiction of origin is eroded with corporate tax revenue losses. The main factors or drivers of profit shifting and tax base erosion are the loopholes in the tax laws of different countries, international mismatches in entities, preferential tax regimes, great difficulty establishing the true value of intellectual property, the artificial splitting of ownership of assets, mispricing related to transfer pricing and significant tax differentials between world countries. Since there are different tax policies regarding corporate income tax, low effectiveness or nonexistence of anti-avoidance measures, different treatments of CFC and thin capitalization rules, these factors create opportunities for MNEs to exploit the inconsistencies between different jurisdictions in order to shift profits and avoid taxation.
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This paper analyzes the relation between tax auditing and fiscal equalization in the context of fiscal competition. We incorporate a model of tax evasion by firms into a standard tax competition framework where regional governments use their audit rates as a strategic instrument to engage in fiscal competition. We compare the region’s choice of audit policies for three different cases: A scenario of unconfined competition without interregional transfers, a scenario with a gross revenue equalization (GRS) scheme and finally, a scenario with net revenue sharing (NRS), where not only the revenues from taxation but also the regions auditing costs are shared. Without regional transfers, fiscal competition leads to audit rates which are inefficiently low for revenue-maximizing governments. While in general GRS aggravates the inefficiency, NRS makes the decentralized choice of auditing policies more efficient. Copyright Springer Science + Business Media, Inc. 2005
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Political parties and party systems exhibit widely varying degrees of nationalization, that is the extent to which a party receives similar levels of electoral support throughout the country. The level of party nationalization has a prominent effect on such important factors as the survival of democracy, the types of issues that dominate political competition, legislative behaviour and public policy. In spite of its importance, party nationalization has been neglected in the comparative politics literature. Our article makes two contributions. First, it provides a Measure of party and party system nationalization, based on the Gini coefficient, that is superior for comparative analysis to those employed to date. Second, it utilizes these measures to analyse nationalization in 17 democracies in the Americas, the first time nationalization has been examined empirically outside the advanced industrial democracies. The measure underscores the widely varying degrees in nationalization across party systems, within party systems over time, across parties within countries and within parties over time.
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We provide new measures of ethnic, linguistic, and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic, and religious heterogeneity on the quality of institutions and growth. We partly confirm and partly modify previous results. The patterns of cross-correlations between potential explanatory variables and their different degree of endogeneity makes it hard to make unqualified statements about competing explanations for economic growth and the quality of government. Our new data, which features the underlying group structure of ethnicities, religions and languages, also allows the computation of alternative measures of heterogeneity, and we turn to measures of polarization as an alternative to the commonly used index of fractionalization.
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The Formation of National Party Systems: Federalism and Party Competition in Canada, Great Britain, India and the United States. By Pradeep K. Chhibber and Ken Kollman. Princeton: Princeton University Press. 2004. 272p. $50.00 cloth, $24.95 paper. The question of the role institutions play in party aggregation has tended to be dominated by discussions of the role and effects of different electoral systems. In a refreshing change from this preoccupation with electoral systems, Pradeep Chhibber and Ken Kollman turn our attention to the impact of federalism, or, more appropriately, the degree of centralization or devolution of power in governmental systems, on the fragmentation of party systems. Their focus is dynamic: They are interested in the formation of national party systems and in how party systems change over time with respect to their extent of nationalization and in relation to the migration of political authority to the center or from the center to states, provinces, or regions. Highly nationalized party systems are ones in which parties receive similar vote shares across different levels of vote aggregation: district, regional, and national. Conversely, in weakly nationalized party systems, parties are differentially competitive across levels.
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The aim of the paper is to shed light on two key questions: How to equalize and how much equalize. In order to do it, a number of issues both political and economic must be previously examined. Moreover, while my interest concentrates into the third type of inter-territorial redistribution, discussion on fiscal equalization often mixes the effects involved by the other two. Hence the need of also dealing with then in what follows. The organization of the paper is the following. In section two relationships between equalization and inter-territorial redistribution with politics are analyzed. Section three is focused on the effects of equalization on efficiency and economic growth. Section four discusses a number of key issues for equalization formulas. Section five concludes.
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Objectives. Considerable evidence suggests that enforcement efforts cannot fully explain the high degree of tax compliance. To resolve this puzzle of tax compliance, several researchers have argued that citizens' attitudes toward paying taxes, defined as tax morale, helps to explain the high degree of tax compliance. However, most studies have treated tax morale as a black box, without discussing which factors shape it. Additionally, the tax compliance literature provides little empirical research that investigates attitudes toward paying taxes in Europe.Methods. Thus, this article is unique in its examination of citizen tax morale within three multicultural European countries, Switzerland, Belgium, and Spain, a choice that allows far more detailed examination of the impact of culture and institutions using data sets from the World Values Survey and the European Values Survey.Results. The results indicate the tendency that cultural and regional differences affect tax morale.Conclusion. The findings suggest that higher legitimacy for political institutions leads to higher tax morale.
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This paper shows that stricter enforcement may increase tax evasion. Individuals vote on a linear income tax, which is used to finance lump sum transfers. Individuals may evade taxes, but they have to pay fines when caught. Stricter enforcement may make redistributive taxation more attractive to the decisive voter. The tax rate and transfer may rise, which in turn may increase tax evasion. The paper also discusses the interaction between voting on taxes and the choice of audit rate by a budget-maximizing bureaucrat.
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This paper analyses tax morale in several Asian countries. The descriptive analysis indicates that tax morale is very low in the Philippines and relatively high in Japan, China, and Bangladesh. In general Asia has a higher tax morale than OECD countries, which might indicate cultural differences. The paper also analyses tax morale as a dependent variable and thus gives answers to what shapes tax morale. Pooling the Asian countries we find, e.g., that trust in the government and the legal system have a positive effect on tax morale. These results remain robust for India and Japan in a time series analysis.
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Our working hypothesis is that cross-cultural differences in tax compliance behavior have foundations in the institutions of tax administration and citizen assessment of the quality of governance. Tax compliance being a complex behavioral issue, its investigation requires use of a variety of methods and data sources. Results from artefactual field experiments conducted in countries with substantially different political histories and records of governance quality demonstrate that observed differences in tax compliance levels persist over alternative levels of enforcement. The experimental results are shown to be robust by replicating them for the same countries using survey response measures of tax compliance.
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This paper examines attitudes to tax evasion. Sample survey data from a randomly chosen group of people are used to analyze this problem using hypothetical questions. The results suggest that evasion is condoned by a large proportion of the population, who are particularly ready to take advantage of someone else's evasion. The problem seems greatest among the young and men. People however appear to be deterred from tax evasion by the consequences of being caught. Empirical analysis supports the importance of both civic duty and ‘law abidance’ in deterring tax evasion.
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The costs imposed by income tax and other citizenship duties provide powerful incentives to free ride, yet the likelihood of getting caught--the primary self-interested deterrent to free-riding--is unlikely to be known with much accuracy by most citizens. Thus the duty heuristic provides not only a direct motivation to comply, but also influences behavior through cognitive processes that bias self-interested beliefs about the advantages of free-riding. Citizens' beliefs about their duty to obey laws of the state bias their information processing and judgments about the fear of getting caught and punished for disobedience, so citizens reporting greater commitment to obey tax laws systematically overestimate the expected penalty for noncompliance. Regression analysis of survey and tax-return data for 445 taxpayers. Subjective risk of getting caught is more closely related to duty than to objective risk factors. Objective audit probabilities affect only taxpayers with greater temptation to cheat, but duty influences tempted taxpayers as much as ordinary taxpayers.
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The electronic version of this book has been prepared by scanning TIFF 600 dpi bitonal images of the pages of the text. Original source: To vote or not to vote? : the merits and limits of rational choice theory / André Blais.; Blais, André, 1947-.; viii, 200 p. ; 24 cm.; Pittsburgh, Pa. :; This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 2 of the TEI in Libraries Guidelines. Digital page images are linked to the text file.
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Government-mandated pension and retirement policies have changed dramatically during the past decade. Pensions at a Glance presents a consistent framework for comparing public-pension policies across OECD countries, as well as reliable data. The report thus provides the basis for not only evaluating existing pension systems, but also designing and implementing future reforms. This second edition updates in-depth information on the key features of mandatory pension systems—both public and private--in the 30 OECD countries, including projections of retirement income for today’s workers. Two new and important sections have been added to this edition: (1) Description and analysis of pension reform in OECD countries during the past decade; and (2) a closer look at the complex range of private, voluntary retirement plans now playing a greater role in pension-provision in many OECD countries. This edition includes StatLinks, URLs under each statistical table and graph linking to Excel ® spreadsheets containing the underlying data. About the first edition of Pensions at a Glance: "Pensions at a Glance deserves much more than a glance. It is a compendium of facts and analyses that should inform policy-making and public debate around the world for years to come. By providing in clear and easy-to-understand form a wealth of information about pension systems throughout the OECD, it will make it much harder for even the most insular to ignore the valuable lessons to be learned from the pension experience of other nations."-- Henry J. Aaron, The Brookings Institution Named one of 12 international "notable government documents" by the American Library Association.
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Political culture in Switzerland is, to a large extent, influenced by its direct democracy. Compared to purely representative systems, direct democracy leads to a different type of communication among citizens and also between citizens and representatives. The opportunity of deciding for themselves on political issues provides citizens with incentives to collect more information. Because citizens are better informed, politicians have less leeway to pursue their personal interests. As a consequence, public expenditure and public debt are lower when citizens enjoy direct democratic rights. Citizens also feel more responsible for their community: tax evasion is lower in direct than in representative democratic systems.
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Tax compliance has been studied in economics by analysing the individual decision of a representative person between paying and evading taxes. A neglected aspect of tax compliance is the interaction of taxpayers and tax authorities. The relationship between the two actors can be understood as an implicit or “psychological” contract. Studies on tax evasion in Switzerland show that the more strongly the political participation rights are developed, the more important this contract is, and the higher tax morale is. In this paper, empirical evidence based on a survey of tax authorities of the 26 Swiss states (cantons) is presented, indicating that the differences in the treatment of taxpayers by tax authorities can be explained by differences in political participation rights as well. Copyright Springer-Verlag Berlin Heidelberg 2002
Article
This paper contains an empirical analysis of income tax noncompliance in Switzerland, based on the standard model of tax evasion. Noncompliance is found to be positively related to the marginal tax burden and negatively to the probability of audit, though the latter impact is only weak. There is no evidence of a significant deterrent effect of the penalty tax. The extended model reveals that noncompliance is positively related to inflation. Finally, noncompliance is significantly lower when citizens/taxpayers have direct control over government budgets, whereas the opposite holds when there is no such control. Copyright 1996 by Kluwer Academic Publishers
Article
In the tax compliance literature, there is a lack of empirical evidence on the degree of tax morale in developing countries. As a novelty, this paper focuses thus on Latin America, analysing tax morale as a dependent variable and searching for factors that systematically affect tax morale, working with the two data sets Latinobarómetro and World Values Survey. Our findings indicate that there is a significant correlation between tax morale and the size of shadow economy. Furthermore, people who said they knew/have heard about practised tax avoidance have a significantly lower tax morale than others. Looking at individuals’ perception of reasons for tax evasion we found that the tax burden, lacking honesty, and corruption are seen as the main factors. We observed a significantly lower tax morale in South America/ Mexico than in the Central American/Caribbean area. Furthermore, trust in the president and the officials, the belief that other individuals obey the law and a pro democratic attitude have a significant positive effect on tax morale. Copyright Springer Science + Business Media, Inc. 2005
Article
An explanation for tax morale based upon a simple model of psychological costs that depend on the perceived legitimacy of public policies is introduced. It is shown that empirically observed low levels of tax evasion can be explained even for a risk-neutral taxpayer with such a model. In a discussion of aggregate tax revenue, it is argued that tax revenue as a function of tax rates may differ fundamentally from the notorious Laffer curve. It is then necessary to look at the interaction of formal and informal institutions to predict the nominal tax rates chosen by a revenue maximizer. Copyright Springer Science+Business Media, LLC 2006
Article
We experimentally investigate social effects in a principal-agent setting with incomplete contracts. The strategic interaction scheme is based on the well-known Investment Game (Berg et al., 1995). In our setting four agents (i.e., trustees) and one principal (i.e., trustor) are interacting and the access to choices of peers in the group of trustees is experimentally manipulated. Overall, subjects are positively influenced by peer's choices they observe. However, the positive interaction between choices is not strong enough to raise the reciprocity of those observing at the same level of those whose choices are observed.
Article
While there is an extensive literature on tax evasion a further aspect of cheating on the state, namely benefit fraud, has gained relatively modest attention in the economic literature. This paper seeks to fill this gap. We explore differences between benefit fraud and tax evasion due to differing social norms. We define the concepts of benefit morale and tax morale as the motivation to abstain from cheating on the state via these two offenses. Our multilevel analysis, based on a large micro data set of respondents from 29 OECD member countries, shows that benefit morale and tax morale have different determinants at an individual-level and respond differently to fiscal policy measures.