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Public perceptions of governance and tax evasion: insights from developed and developing economies

Khalil Nimer (Department of Accounting and MIS, Gulf Financial Center (GFC), Gulf University for Science and Technology (GUST), Mishref, Kuwait)
Ahmed Bani-Mustafa (Department of Mathematics and Physics, School of Engineering, Australian University, Mishref, Kuwait)
Anas AlQudah (Department of Banking and Finance, Yarmouk University, Irbid, Jordan)
Mamoon Alameen (Department of Mathematics and Physics, School of Engineering, Australian University, Mishref, Kuwait)
Ahmed Hassanein (Department of Accounting and MIS, Gulf University for Science and Technolgy, Mishref, Kuwait and Faculty of Commerce, Mansoura University, AlMansoura, Egypt)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 15 December 2022

65

Abstract

Purpose

This paper aims to explore how the role of the perception of good public governance reduces tax evasion (TE). Besides, this study investigates whether the nexus of public governance and TE differs between developed and developing economies.

Design/methodology/approach

Apart from the ordinary least squares (OLS) model, this study uses the linear mixed modeling technique. The World Governance Indicators and the multiple causes estimation (MIMIC) method are used to measure public governance. The shadow economy is used as a proxy for TE.

Findings

The results show that people's perceptions of public governance and the quality of government institutions are core elements that influence tax-evasion behavior. Besides, the rule of law (RoL) and political stability (PS) significantly impact tax-evasion behavior in developing countries. Nevertheless, the RoL, the control of corruption and PS are the most critical tax-evasion determinants among public governance indicators for developed countries. Regulatory quality shows a substantial positive relationship with TE in developed but not developing countries.

Practical implications

This paper provides a guide for policymakers on reducing tax-evasion behavior by paying more attention to maintaining the RoL and PS and fighting corruption. Additionally, this study highlights the importance of people's perceptions of the government's pursuit of the above policy-related improvements, which, in turn, affect their tax behavior.

Originality/value

To the best of the authors’ knowledge, this study is the first to explore the role of people's perceptions of improvements in public governance and how this can reduce TE behavior in developed and developing economies. Unlike prior studies, this study used the linear mixed model method, which is more advantageous than OLS and produces robust estimators.

Keywords

Acknowledgements

Funding: There is no funding for this project.

Conflict of interest: All authors declare that they have no conflict of interest.

Citation

Nimer, K., Bani-Mustafa, A., AlQudah, A., Alameen, M. and Hassanein, A. (2022), "Public perceptions of governance and tax evasion: insights from developed and developing economies", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-06-2022-0234

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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