Life Satisfaction and Tax Morale in Azerbaijan: Mediating Role of Institutional Trust and Financial Satisfaction

Orkhan Nadirov,Bruce Dehning,Rafiga Aliyeva,Khatai Aliyev,Ilaha Sharifzada

doi:10.3390/su132112228

Abstract

This paper examines the relationship between life satisfaction (measured as the self-reported satisfaction of each individual with their past life and goal achievements) and tax morale (measured as the likelihood of an individual’s intrinsic motivation to pay taxes). Using a large-scale survey dataset from Azerbaijan, it is documented that life satisfaction is positively associated with tax morale. Life satisfaction plays a significant role in increasing tax compliance practices. It is also important to note that there is a positive mediating effect of life satisfaction on tax morale through financial satisfaction and institutional trust. In line with our hypotheses, the results of a series of analyses remain robust to different models. These results imply that a higher level of life satisfaction may increase the proportion of individuals who report the highest tax morale in Azerbaijan. Our findings have policy implications for Azerbaijan and other governments aiming to alleviate high levels of tax evasion.

Highlights

The concept of tax evasion has received considerable attention since the 1970s, with seminal contributions by Ref [1,2,3]
These early theories of tax evasion suggest that individuals are utility maximizers who consider the chances of tax cheating as a risky decision
This paper aims to shed light on the effect of life satisfaction on tax morale by investigating the mediating role of institutional trust and financial satisfaction in Azerbaijan

Summary

Introduction

The concept of tax evasion has received considerable attention since the 1970s, with seminal contributions by Ref [1,2,3]. According to Ref [1], tax compliance increases or decreases with the probability of an audit and the size of potential fines that may be levied on the evader. In this rational choice approach, the assumption that taxpayers decide whether to pay taxes depends upon the probability of detection and the size of the penalty. These early theories of tax evasion suggest that individuals are utility maximizers who consider the chances of tax cheating as a risky decision. Most recent studies on tax evasion have been developing new behavioral models to explain this complex issue (e.g., [4], for review)

Objectives

Results

Conclusion