Tax morale: Framing and fairness

Abstract

Tax morale has been a focus of academics and policy makers for some time. The measurement of individuals’ tax morale is subjective, and various proxies have been employed in qualitative and quantitative research. The framing of these measures has been considered in some research with respect to equivalency or goal framing, but the underlying implication of emphasis framing in commonly used proxies has yet to be considered. Further, although fairness and financial literacy have been considered determinants of tax morale, no one has yet considered whether financial and tax literacy (FTL) has a moderating effect on fairness and tax morale.This research addresses these gaps in the literature. The findings suggest that questions and scenarios posed by academics and policy makers should consider positive, negative, and emphasis framing, as well as the moderating effect of the respondents’ FTL to measure individuals’ tax morale effectively. The findings also suggest that raising levels of FTL could have a double dividend: not only will improved FTL have a positive impact on tax morale, but it might be magnified through the impact of fairness. These findings hold only when morale is determined by negatively framed scenarios. In particular, the perceived fairness of the tax system enhances tax morale when FTL is high, whereas the perception of fairness has no effect on tax morale for respondents with lower levels of FTL.