Determinants of tax morale in Spain and Turkey: an empirical analysis

While economic deterrence models are fully based on maximizing economic utility; social psychology models explain human behavior by examining the underlying attitudes, norms and beliefs. Tax morale is defined as the intrinsic motivation to pay taxes. However, determinants of tax morale need to be investigated for a more comprehensive understanding of tax morale. In this paper we analyze the most important determinants of tax morale in Iran using data from World Values Surveys (WVS). Determinants of tax morale are categorized into four main groups: social capital, conditional cooperation, demographic factors and economic situation of the respondents. Estimating ordered probit model, we find that conditional cooperation and economic situation have the most important effects on tax morality. However, some of the social capital variables like importance of politics and religion and demographic factors like gender and marital status don’t have significant effect on tax morale in Iran.

When the government adopts a tax amnesty policy, it simultaneously indicates lower citizens' tax morale. Unlike previous studies that emphasized economic, regulatory, and tax service variables, this research attempts to analyze several attributes of the socio-economic life of taxpayers as determinants of tax morale. This study examines the effect of trust, corrupt practices in public services, happiness, and religiosity on the tax morale of Indonesian citizens. This cross-sectional study adopts a quantitative approach and utilizes secondary data from the 7th Word Value Survey (WVS) collected in 2017. The WVS respondents were 3,200 Indonesian citizens over 17 years old and spread across several provinces. Data were processed and analyzed using logistic regression. The authors argue that five independent variables influenced citizens' tax morale in Indonesia: the level of education, the perceptions of corruption practices in public services, the level of happiness, the job status, and religion. This research produces the characteristics of Indonesian citizens with high tax morale: educated, perceived corruption in public services, happy, employed, and Moslem. The result corroborates several previous studies that confirm a positive effect on happiness, education level, employment status, religion, tax morale and an adverse effect of corruption on tax morale. The authors recommend that the government increase access to quality/quantity of education, eradicate corruption, improve citizens' happiness, and create new jobs for citizens based on the spirit of inclusiveness (no one left behind).

This research aims to analyse tax morale’s effect on compliance, focusing on socioeconomic, cultural, and institutional influences, particularly in developing economies. We utilise a literature review to explore theoretical and empirical insights into tax morale and compliance, assessing the impact of trust, fairness, and governance. Key factors like government trust and fairness perceptions are identified as crucial to tax morale. We also highlight the role of corporate governance in shaping compliance strategies. This study enhances understandings of tax morale’s determinants and compliance implications, offering a theoretical framework for future research. As such, we recommend policy and educational measures to improve tax morale and compliance, emphasising the importance of trust and fairness. However, the review’s scope is limited to available literature, suggesting empirical research is needed to validate these findings further. Keywords: board of directors, determinants of tax morale, tax compliance, tax morale

PurposeThe 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/approachTo do this, a systematic search has been conducted using a library catalogue which provides access to more than 400 databases.FindingsThe 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/implicationsThe 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 implicationsThe 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/valueThis is the first systematic review of the factors that influence tax morale using an institutionalist lens.

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.

Social Capital and Tax Morale in Spain

Tax morale: Framing and fairness

The limited effect of economic self-interest on the political attitudes of the mass public

Under which conditions is moral justification of taxation possible? This question does not only interest philosophers and economists from a scientific point of view, but can have considerable practical relevance as well because the willingness of citizens to pay taxes may depend upon whether they consider taxation to be morally justified or not. We first consider theoretical arguments on the role of tax morale, and when tax evasion might be considered as justified by citizens or not. Then we ask how tax morale can be measured. Next, we discuss the role of tax morale for the shadow economy, before determinants of tax morale and empirical results for the impact of tax morale on tax compliance are discussed. For a high tax morale, institutional and cultural factors are at least as important as economic incentives.

Tax morale has been recognized as the key to understand the levels of compliance achieved in most countries. We applied a structural equation model (SEM) to gain a better understanding about the factors shaping tax morale of Portuguese taxpayer’s. Our purpose was to analyse through SEM the direct effects of political democratic system, political participation, religiosity, individual satisfaction, trust in others and institutional trust on tax morale. SEM of tax morale allowed us to analyse the impact of demographic variables and risk aversion as determinants of tax morale through the use of multi-group analysis of structural invariance of SME developed. A sample of 1,553 Portuguese individual’s representative of Portuguese population obtained from European Values Study (EVS, 2010) was used. The results confirmed that Portuguese taxpayers tax morale is influenced by taxpayers trust on institutions like government, parliament and the judicial system, by political participation and by the belief that democracy is a good political system for governing the country. Tax morale is also influenced by individual s satisfaction, by religiosity and by societal behaviour (trust in others). © 2013 European Journal of Research on Education by IASSR.

The article investigates tax morale during different economic milieus, going hand in hand with the introduction of different currency regimes. It was guided by econometric research and data were collected using questionnaires from the 2010–2014 and 2017–2020 World Values Survey (WVS). For Zimbabwe, Wave 6 and Wave 7 had a sample size of 1500 and 1200 respectively. The article’s dependent variable, tax morale and independent variables included marital status, age, income level, employment and religion among others, and analysed them using the Ordered Logit Model. The article concludes with an understanding of how tax morale and its determinants is crucial for governments in their bid to boost voluntary compliance. Also, different economic milieus for a particular country affect the level of tax morale significantly. Tax morale was established to be high when Zimbabwe was experiencing economic growth due to the introduction of multi-currency, herein called the dollarization period, and the opposite was true for the post-dollarization era. Corruption, which is a menace under study, has proven to be an important factor that influences tax morale. Results of all the models show that demographic factors have little effect on tax morale. The article introduced an important variable of hunger in its analysis of determinants of tax morale. The article showed that there is a negative relationship between hunger and tax morale for Zimbabwe in both economic situations. Based on the findings, policy makers should consider the eradication of corruption and hunger in order to boost tax morale, which in turn improves tax compliance. Also, policy makers should include improvement in the perception of democracy in the mix of enhancement strategies of tax compliance.

Brian Erard of B. Erard and Associates reviews “Tax Compliance and Tax Morale: A Theoretical and Empirical Analysis” by Benno Torgler,. The EconLit Abstract of the reviewed work begins “Explores the reasons why citizens practice tax compliance and considers whether enforcement efforts can explain the high degree of compliance, focusing on the idea of tax morale. Discusses what we know about tax morale and compliance; speaking to theorists and searching for facts--tax morale and compliance in experiments; the importance of faith--tax morale and religiosity; tax morale and institutions; tax morale in Latin America; whether culture matters--a comparison of tax morale in the former East and West Germany; moral suasion--an alternative tax policy strategy?--evidence from a controlled field experiment in Switzerland; and tax amnesties and political participation. Torgler is Associate Professor in the School of Economics and Finance at Queensland University of Technology, Research Fellow with the Center for Research in Economics, Management, and the Arts, and Research Affiliate with the CESifo Research Network. Index.”

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.

This article appeared in the December 31, 2007 Annual Report to Congress of the National Taxpayer Advocate, which commissioned this research. Why do people follow the law? The answer, under the traditional theory of compliance, is fear of detection and punishment. The deterrence model, however, accounts for only a minor portion of actual compliance levels. It has such poor explanatory power because it assumes that the decision to comply is based solely on a rational cost-benefit analysis in which people weigh the benefits of non-compliance against the costs of detection and penalties. Recent literature reveals, however, that the decision to comply is not purely rational. Rather, personal values, social norms, and non-rational cognitive processes also strongly affect the decision. What holds true for law in general holds true for tax compliance specifically. Traditional methods of enforcement through audit and penalties explain only a small fraction of voluntary tax compliance. Theorists and researchers attribute the vast majority of compliance to what they loosely describe as internal motivations or “tax morale.” The field is still young, the subject complex, and some of the empirical data is inconclusive. Nevertheless, the literature clearly indicates that tax morale plays a major role in tax compliance.Although neither the exact components of tax morale nor the precise mechanisms by which they work have yet been fully delineated the literature has identified certain elements. Research shows that tax compliance is affected by (social and personal) norms such as those regarding procedural justice, trust, belief in the legitimacy of the government, reciprocity, altruism, and identification with the group. Cognitive processes, such as prospect theory, also influence an individual’s reaction to tax issues. Studies also indicate that certain demographic factors such as age, gender and education correlate with the tax morale.The components of tax morale, like internal motivators in other areas of the law, are not static. They interact with each other and the environment and are influenced by each individual’s own cognitive framework. Consequently, an external agent, such as the IRS, can influence tax morale norms and thereby tax compliance. It can activate compliance norms in a variety of ways including education, properly framing communications, fair procedures, and a regulatory framework that incorporates current and future findings of tax morale research into its operations and dealings with taxpayers.The Report makes three major recommendations. First, the IRS should establish a department devoted solely to exploring tax morale issues and implementing the findings. Second, the IRS should adopt a tax morale approach to tax compliance that recognizes the importance of taxpayers’ internal motivations and the effects on these motivations of societal conditions and institutions (such as the IRS) that interact with them. Third, using behavioral science research, the IRS should implement ongoing educational (long term and short term) programs and media campaigns. Since the subject of this Report is tax compliance of individual taxpayers, both the literature review and the recommendations focus on individuals. Both the tax morale concept and this Report, however, are relevant for all taxpayers.

The paper made a factor analysis of the variables that shape the tax morale of individuals indeveloping economies as well as the factors that citizens considered to be important inassessing government performance. Data from the Afrobarometer Survey 6 Questionnaireadministered on Nigerians was used for the analysis. Desk review of several journal articleswas made to extract the relevant factors used for the study. A collection of variables offeredin the literature as determinants of tax morale and the aspects of government that are measuredwhen assessing government performance were synthesized as measurement parameters. Bothexploratory and confirmatory factor analyses were conducted using principal componentanalysis. The study established that the data from Afrobarometer Survey 6 on Nigeria wasfound reliable with adequate goodness of fits, which is significant for any study. The paperfound six of the items on the questionnaire suitable to measure tax morale and ten other itemssuitable as measures of government performance under three dimensions as an improvementon economic issues, infrastructure provision, and social issues. The paper recommends thatthe government and other policymakers should pay sufficient attention to tax morale and theperformance of government, especially adequate provision of food and improving the standardof living among the poor citizens before attempts at controlling crime.