Culture differences and tax morale in the United States and in Europe

Abstract

Much recent research has investigated whether values, social norms, and attitudes differ across countries and whether these differences have measurable effects on economic behavior. One area in which such studies are particularly relevant is tax compliance, given both the noted differences across countries in their levels of tax compliance and the marked inability of standard economic models of taxpayer compliance to explain these differences. In this paper we estimate the determinants of an individual’s intrinsic willingness to pay taxes – what is sometimes termed “tax morale” – using information from the World Values Survey for a wide range of countries over several years of data. We first analyze a cross-section of individuals in Spain and the United States. In line with previous experimental results, our findings indicate a significantly higher tax morale in the United States than in Spain, controlling in a multivariate analysis for additional variables. We then extend our multivariate analysis to include an additional 14 European countries. Our results again indicate that individuals in the United States have the highest tax morale across all countries, followed by Austria and Switzerland. We also find a strong negative correlation between the size of shadow economy and the degree of tax morale in those countries.