The Relationship between Culture and Tax Evasion: A Cross-Country Study

Abstract

This study investigates the relationship between culture and tax evasion across countries. Specifically, the study unpackages culture in terms of Hofstede's (1980) power distance, individualism, uncertainty avoidance and masculinity cultural dimensions, and develops hypotheses which consider their relationship with tax evasion. Based on data from 47 countries, and after controlling for economic development, legal framework and political structure, the OLS regression results show that the higher the level of power distance and uncertainty avoidance and the lower the level of economic development and common law, the higher is the level of tax evasion across countries. These findings remain robust to different measures of tax evasion. Government policy-makers should find the results of this study useful in assessing the possibility of tax evasion from cultural, economic and legal perspectives and in developing tax reform policies to reduce tax evasion.