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Book part
Publication date: 18 December 2016

William D. Brink and Thomas M. Porcano

The purpose of this study is to develop a comprehensive international tax evasion framework by examining how national cultural variables and economic structural variables…

Abstract

The purpose of this study is to develop a comprehensive international tax evasion framework by examining how national cultural variables and economic structural variables impact individuals’ tax morale and tax evasion.

This study uses structural equation modeling (SEM) to simultaneously analyze direct and indirect paths between country-level variables, tax morale, and tax evasion.

The results of this study show that multiple cultural and structural level variables directly impact tax evasion. Further, multiple cultural variables indirectly impacts tax evasion via changing individuals’ tax morale attitudes. In that, higher tax morale leads to lower levels of tax evasion. Finally, the analysis demonstrates that tax morale attitudes and tax evasion levels differ significantly in developed countries versus in-transition or developing countries. In addition, the impact of these cultural variables and economic variables on tax morale and tax evasion differ depending on a country’s economic development.

This study further develops an understanding of how various cultural variables and economic variables impact tax evasion. Such that, some of the variables change tax morale attitudes which impacts tax evasion while other variables impact tax evasive behavior directly. This more holistic model can be used by researchers to further explore tax evasion behavior in an international context.

Policy makers should take note of this study when developing strategies to mitigate tax evasive behavior. Specific country characteristics, such as culture and economic structure, will impact how individuals respond to policy (e.g., new laws or penalties).

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78635-001-5

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Book part
Publication date: 18 December 2016

Fadi Alasfour, Martin Samy and Roberta Bampton

This paper investigates how individuals determine their tax morale levels and tax compliance decisions. Using a questionnaire survey and a multivariate tests procedure…

Abstract

This paper investigates how individuals determine their tax morale levels and tax compliance decisions. Using a questionnaire survey and a multivariate tests procedure, the paper revealed that tax evasion is morally acceptable in Jordan under some circumstances, indeed there could be an affirmative duty to evade taxes since the government is perceived to be highly corrupted. The findings also show that while the extent of the governmental corruption has a positive (negative) effect on tax non-compliance (tax morale), the efficient expenditure of governmental tax revenues has a negative (positive) impact on tax non-compliance (tax morale). The individuals’ tax non-compliance decisions are likewise positively affected by the tax rates and by the taxation system’s being perceived as unjust, but decline with the increase of audit rates and the subsequent penalty rates. The degree and effectiveness of these determinants are dependent on the individual’s level of risk aversion, financial constraints and the surrounding referent groups. The results also confirm that individual factors play a significant role in determining the level of tax morale. Overall, the tax morale level and the compliance decision of an individual are greatly influenced by gender, age, educational level, occupational status and religious background.

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Advances in Taxation
Type: Book
ISBN: 978-1-78635-001-5

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Article
Publication date: 9 November 2015

Muazu Ibrahim, Alhassan Musah and Abdallah Abdul-Hanan

This paper aims to investigate the determinants of the motivation to pay tax in Ghana. Traditionally, raising tax morale to ensure compliance is often tied to the level of…

Abstract

Purpose

This paper aims to investigate the determinants of the motivation to pay tax in Ghana. Traditionally, raising tax morale to ensure compliance is often tied to the level of prevailing enforcement. But beyond enforcement, why do citizens pay tax?

Design/methodology/approach

This paper relied on the sixth wave of the World Values Survey data in determining the drivers of tax morale. It used the probit model with different specifications to determine robustness of the results.

Findings

The findings remain robust to model specification and show a non-linear relationship between age and tax morale. The level of education, marital status, patriotism, sector of employment, satisfaction with democracy and one’s “fear of God” do not matter in tax morale. The economic class of a person per se is also far from being a significant driver and that people are intrinsically motivated to pay tax once they are satisfied with their financial situation, have trust in the government as well as confidence in the parliament.

Originality/value

In addition to being a pioneering micro-econometric work on the determinants of tax morale in Ghana, the main contribution of the study lies in its investigation of a non-linear relationship between age and tax morale in Ghana.

Details

Humanomics, vol. 31 no. 4
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 1 December 2006

James Alm, Jorge Martinez‐Vazque and Benno Torgler

This paper examines citizens' attitudes toward paying taxes – what is sometimes termed their “tax morale” or the intrinsic motivation to pay taxes – focusing on the…

Abstract

Purpose

This paper examines citizens' attitudes toward paying taxes – what is sometimes termed their “tax morale” or the intrinsic motivation to pay taxes – focusing on the experience of individuals in the Russian Federation before, during, and after the transition from a planned socialist economy to a market‐based economy.

Design/methodology/approach

Micro‐level data for Russia from the World Values Survey and the European Values Survey for the years 1991, 1995, and 1999 are used to estimate the determinants of individuals' attitudes toward paying taxes. The data also allow the examination of the evolution of tax morale in the regions of Russia.

Findings

The estimation results show decay in tax morale in the first four years of the transition, and a small recovery in 1999. Significant regional differences in tax morale are also found.

Research limitations/implications

The results are consistent with the relevance of social norms in tax compliance, where the widespread perception of tax evasion and of a corrupt and inefficient state led initially to a decline of tax morale. The results also indicate that the restoration of a higher level of trust in the state, after some progress in the transition to a market economy, positively influenced tax morale.

Practical implications

The results suggest, once tax morale is crowded out, it is difficult for government to raise tax morale very quickly back to previous levels. Doing so requires designing tax systems, tax administrations, and government structures that inspire trust and pride in governmental and legal institutions.

Originality/value

A unique aspect of the analysis is the ability to study tax morale at the individual level before (1991), during (1995), and shortly after (1999) the Russian transition.

Details

International Journal of Social Economics, vol. 33 no. 12
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 10 September 2018

Ioana Alexandra Horodnic

The purpose of this paper is to conduct a systematic review of the factors that shape tax morale. A large range of random explanatory variables identified in the…

Abstract

Purpose

The purpose of this paper is to conduct a systematic review of the factors that shape tax morale. A large range of random explanatory variables identified in the literature as determinants of tax morale are synthesised and structured by drawing inspiration from the institutional theory.

Design/methodology/approach

To do this, a systematic search has been conducted using a library catalogue which provides access to more than 400 databases.

Findings

The finding is that the institutional theory provides a suitable theoretical basis to explore tax morale. Indeed, all the factors until now identified as determinants of tax morale (except the control variables/socio-demographic characteristics) can be categorised either as belonging to formal institutions or to informal institutions. The most salient factor is trust, with both vertical and horizontal trust positively related to tax morale.

Research limitations/implications

The outcome is a call for a more nuanced understanding of not only the effect of formal and informal institutions on tax morale but also how formal and informal institutions interact and alter each other and, consequently, affect tax morale.

Practical implications

The paper seeks to encourage governments to start recognising that as low tax morale arises when a gap exists between formal and informal institutions, they need to design policy measures aimed to reduce this gap, rather than persisting with deterrence measures.

Originality/value

This is the first systematic review of the factors that influence tax morale using an institutionalist lens.

Details

International Journal of Sociology and Social Policy, vol. 38 no. 9/10
Type: Research Article
ISSN: 0144-333X

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Book part
Publication date: 15 November 2018

Aristidis Bitzenis and Vasileios Vlachos

A report of the International Labour Organization on undeclared work in Greece refers to failures of formal institutions which contribute to the asymmetry between state…

Abstract

A report of the International Labour Organization on undeclared work in Greece refers to failures of formal institutions which contribute to the asymmetry between state and civic morality. The particular asymmetry is explored through the context of tax morale, which is one of the major determinants of the shadow economy. Although several papers have been published on the Greek shadow economy, tax morale in Greece has not been adequately explored. This research aims to investigate the effect of the economic downturn on the factors determining the level of tax morale through primary data from a European Union-funded research project on the Greek shadow economy. The findings provide policy orientations toward transferring activities from the shadow to the official economy, a goal which is part of Europe 2020 strategy.

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Advances in Taxation
Type: Book
ISBN: 978-1-78756-416-9

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Article
Publication date: 9 October 2017

Colin C. Williams and Besnik Krasniqi

Recently, a small but burgeoning literature has argued that tax non-compliance cannot be fully explained using the conventional rational economic actor approach which…

Abstract

Purpose

Recently, a small but burgeoning literature has argued that tax non-compliance cannot be fully explained using the conventional rational economic actor approach which views non-compliance as occurring when the pay-off is greater than the expected cost of being caught and punished. Instead, a social actor approach has emerged which views tax non-compliance as higher when “tax morale”, defined as the intrinsic motivation to pay taxes, is low. To advance this social actor model, the purpose of this paper is to evaluate the individual and national heterogeneity in tax morale, which is crucial if tax compliance is to be improved.

Design/methodology/approach

To do this, the authors report data from the 2010 Life in Transition Survey on tax morale in 35 Eurasian countries.

Findings

Logit econometric analysis reveals, on the one hand, that there is higher tax morale among middle-aged, married, homeowners with children, with a university degree and employed, and on the other hand, that there is higher tax morale in more developed countries with stronger legal systems and less corruption, and higher levels of state intervention in the form of both taxation and expenditure.

Research limitations/implications

Rather than continue with the rational actor approach, this paper reveals that how an emergent social actor approach can help to more fully explain tax non-compliance and results in a different policy approach focused upon changing country-level economic and social conditions associated with low tax morale and thus non-compliance.

Practical implications

These results display the specific populations with low tax morale which need targeting when seeking to tackle tax non-compliance.

Originality/value

This paper provides a new way of explaining and tackling tax non-compliance in Eurasian countries.

Details

Journal of Economic Studies, vol. 44 no. 5
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 11 July 2016

Colin C Williams and Ioana Alexandra Horodnic

The purpose of this paper is to propose a new way of explaining participation in the informal economy as resulting from the asymmetry between the codified laws and…

Abstract

Purpose

The purpose of this paper is to propose a new way of explaining participation in the informal economy as resulting from the asymmetry between the codified laws and regulations of a society’s formal institutions (government morality) and the norms, values and beliefs of the population that constitute its informal institutions (societal morality). The proposition is that the greater the asymmetry between government morality and societal morality, the greater is the propensity to participate in the informal economy.

Design/methodology/approach

To evaluate this institutional asymmetry theory, the results are reported of 1,306 face-to-face interviews conducted during 2013 in the UK.

Findings

The finding is a strong correlation between the degree of institutional asymmetry (measured by tax morale) and participation in the informal economy. The lower the tax morale, the greater is the propensity to participate in the informal economy. Using ordered logistic regression analysis, tax morale is not found to significantly vary by, for example, social class, employment status or wealth, but there are significant gender, age and spatial variations with men, younger age groups, rural areas and Scotland displaying significantly lower tax morale than women, older people, urban areas and London.

Practical implications

Rather than continue with the current disincentives policy approach, a new policy approach that reduces the asymmetry between government morality and societal morality is advocated. This requires not only changes in societal morality regarding the acceptability of participating in the informal economy but also changes in how formal institutions operate in order for this to be achieved.

Originality/value

This paper provides a new way of explaining participation in the informal economy and reviews its consequences for understanding and tackling the informal economy in the UK.

Details

International Journal of Social Economics, vol. 43 no. 7
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 7 January 2019

Doreen Musimenta, Sylvia Naigaga, Juma Bananuka and Mariam Ssemakula Najjuma

The purpose of this study is to examine the contribution of tax morale, compliance costs and tax compliance of financial services firms in Uganda.

Abstract

Purpose

The purpose of this study is to examine the contribution of tax morale, compliance costs and tax compliance of financial services firms in Uganda.

Design/methodology/approach

This study is cross-sectional and correlational and adopts firm-level data collected using a questionnaire survey of 210 financial services firms in Uganda from which usable questionnaires were received from 152 financial services firms.

Findings

Tax morale and compliance costs contribute up to 20.6 per cent of the variance in tax compliance of the financial services firms. Tax morale and tax compliance are positively and significantly associated. Results further indicate that compliance costs and tax compliance are positively and significantly associated. National pride and trust in government and its legal systems as dimensions of tax morale independently are significantly associated with tax compliance. Results also indicate that administration costs and specialist costs as dimensions of compliance costs individually are significantly associated with tax compliance.

Research limitations/implications

This study results should be generalized with caution, as they are limited to the financial services firms in Uganda.

Originality/value

Whereas there has been a number of studies on tax compliance in both developed and developing countries, this is the first study on the African scene to examine the contribution of tax morale and compliance costs on tax compliance of financial services firms in a single suite. It is unbelievable that the financial services firms, especially commercial banks which are highly regulated by the central bank in many developing countries, can afford to report tax payables year after year.

Details

Journal of Money Laundering Control, vol. 22 no. 1
Type: Research Article
ISSN: 1368-5201

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Book part
Publication date: 15 November 2018

K-Rine Chong and Murugesh Arunachalam

This study examines the determinants of enforced tax compliance behavior of Malaysian citizens where trust in tax authorities is assumed to be a mediator. Quota sampling…

Abstract

This study examines the determinants of enforced tax compliance behavior of Malaysian citizens where trust in tax authorities is assumed to be a mediator. Quota sampling method was used to select a sample of 340 participants to participate in a survey. A two-step structural equation modeling (SEM) process was adopted to test a framework comprising 13 hypotheses. Model fit was initially measured using confirmatory factor analysis (CFA) while model specification was applied in the second stage to test the structural relationship. The mediating effects of trust in tax authorities were tested via Baron and Kenny (1986) approach, bootstrapping, and AMOS AxB estimand. The findings confirmed that trust in government, trust in tax administrator, power of Inland Revenue Board of Malaysia, and awareness influence enforced compliance. However, tax morale and tax amoral behaviors do not influence enforced compliance. The findings suggest that citizens would fulfill their tax responsibilities if they believe that tax authorities are effective in tax administration. Trust in government fosters trust in the tax authorities. This study contributes to existing literature by confirming the factors that affect enforced tax compliance.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78756-416-9

Keywords

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