Tax Morale Research Articles

Tax Morale: Direct and Indirect Paths between Trust Factors: Empirical Evidence from Greece

A plethora of evidence can be found in the literature supporting the view that citizens’ trust in the state plays a decisive role in their overall tax compliance. Nevertheless, in Greece, where the consequences of a ten years long economic crisis still exist, the phenomenon of tax evasion is still dealt with traditional enforcement methods like penalties, regular audits, and tax policy. A new conceptual model is proposed and empirically tested using data from 1,014 Greek citizens from fifty areas of Greece. It attempts to examine the combined effect of ten trust-related factors, which are grouped into four dimensions on tax morale (trust in governance quality, trust in principles and institutions, trust in fellow citizens and trust in personal perceptions). The results show that Greek citizens’ trust in tax reciprocity is the factor that mainly affects tax morale, with citizens’ trust in tax authorities and in the institution of democracy closely following.

Exposure to tax dilemmas deteriorate individuals' self-declared tax morale

Exposure to tax dilemmas deteriorate individuals' self-declared tax morale

Tax Consulting as a Special Type of Service Activity

Tax consulting is a special type of service activity, with certain specifics related to some other activities. The name itself indicates that it involves providing advisory services, given by specially qualified and trained professionals, with respect to professional-ethical and professional principles, and above all the principles of legality, independence, autonomy, expertise, conscientiousness and professional secrecy as well as other principles that are mutually determined and supplemented. The main purpose of tax consulting is to help taxpayers in completing their tax obligations and to properly understand and apply tax laws. In a broader sense, it means representing the taxpayer in tax and court proceedings. On the other hand, observing the complexity of the tax-legal relationship, the inequality of the parties in this relationship, which stems from the very nature of taxes, it is indisputable that tax advice contributes to tax efficiency and overall tax policy, humanization of tax-legal relationship, development of taxpayers’ awareness on the importance of taxation and the development of tax morale. The goal of this paper is to investigate tax consulting in Bosnia and Herzegovina and the countries of the region, using research, historical, normative and comparative methods.

Degrees of formalization of agricultural entrepreneurs: going beyond registration

The dichotomous view of formalization – ‘registered’ versus ‘not registered’ – is a widely adopted approach for analyzing entrepreneurs and their businesses. It, however, fails to adequately capture the multiple dimensions of the formalization process and limits the scope of interventions to promote business formalization. Hence, this study expands the conceptualization of agribusinesses’ formalization from a dichotomic view to a richer and more dynamic perspective. Using data from a survey of 819 agribusinesses in Benin, we develop a framework that considers multiple dimensions of formalization, namely registration status, compliance with tax law, and compliance with labor law and examine factors that influence the position of entrepreneurs on the formalization continuum. The result shows that agricultural entrepreneurs operate at varying degrees of formalization. Among the surveyed businesses, we found that about 46% were wholly informal, 6% were largely informal, 22% were only registered, 24% were largely formal, and 3% were wholly formal. Entrepreneurs who displayed higher levels of formalization were largely based in urban areas and older, with higher incomes and educational levels. They were also associated with greater awareness of the formalization procedures, had higher tax morality, and perceive a high risk of detection. The result underscores the need to rethink the dichotomous view of formalization and offers insights for targeting policy efforts to increase formalization in agribusinesses.

PERSONAL INCOME TAX GAPS: BIBLIOMETRIC AND ECONOMETRIC ANALYSIS

Abstract. The article is devoted to the essence and features of the formation of personal income tax gaps. The object of the paper is 1795 publications indexed in the Scopus database on the tax gaps in the national economy. The time horizon of the study was in 1935—2021. On the basis of bibliometric analysis, the main directions of the study of tax gaps are determine, the trend of changing the number of publications on this issue is analyzed. It is concluded that the theory of tax gap management is quite young and is currently only in its infancy. By the VOSViewer tools, five patterns of frequency of use of keywords in scientific works devoted to the issues of forming tax gaps have been identified, their connection with other economic categories have been determined. The analysis of the publications indexed in the Scopus database on a geographical basis is carried out. Clustering international research networks based on bibliometric analysis of scientific papers on the theory of tax gaps management by geographical location have been done. The article identifies the top Scientific Journals indexed by the Scopus database in which the issues of tax gap management were published most often. According to the Scopus database the most popular theories within this problem are: social theories, inequality and tax morality, management and motivation theories, sustainable development theory, production theory, concepts of fiscal policy implementation. A methodical approach to the assessment of tax gaps for personal income tax is proposed. The personal income tax gaps for Ukraine and European Union countries has been estimated. An average volume of personal income tax gaps within 7—28 %, and there is no positive dynamics in its reducing. The countries with the highest volume of personal income tax gaps include Greece, Poland, the Slovak Republic, Turkey, with the lowest — Germany, Belgium, Latvia, Luxembourg. Based on the Multiple regressions test, the hypothesis about the significant impact of tax gaps on personal income tax on the country’s economic development indicators was tested. Graphical interpretation of the link between the personal income tax gap and GDP for Ukraine and European Union countries indicates a negative correlation between them. Keywords: tax gap, shadow economy, tax evasion, GDP, economic development, state policy. JEL Classification E60, E63, C23 Formulas: 1; fig.: 4; tabl.: 2; bibl.: 17.

The tax morale of exhausted taxpayers. The case of Greece

The tax morale of exhausted taxpayers. The case of Greece

TAX CULTURE AND TAX MORALE: IMPACT ON TAX COMPLIANCE IN UKRAINE

The purpose of writing this article is to assess the impact of tax culture and tax morale on the tax compliance in Ukraine and to develop recommendations for further transformation of the national tax culture. We established that among the reasons for maintaining the size of the shadow sector of the economy in Ukraine is the focus on reforming the tax system, tax administration without taking into account the tax culture that has developed historically. Components of tax culture have different levels of formation. Procedural and technological culture is currently being actively developed. Digitalization and electronic services, involvement in the international fight against tax evasion facilitated this process. The culture of behavior, primarily of taxpayers, was formed spontaneously, without the direction of the process by the authorities. Given the confirmed correlation between tax compliance and tax morale, widespread taxpayer deviant behavior in Ukraine is largely due to low tax morale. The level of tax morale in Ukraine tends to decrease and tends to minimum rather than average values in the sample of World Values Survey`s countries. We determined that the low level of tax morale in Ukraine is caused mainly by the action of institutional factors: distrust of the government, government instability, anti-democratic phenomena and corruption. In Ukraine, for further development of tax culture it is necessary to follow next recommendations: to conduct a large-scale sociological survey to identify all socio-economic and institutional factors influencing the tax morale of domestic taxpayers, as well as to identify the current level of tax literacy; actively introduce tax education at all levels of education. Further research will be related to assessing the level of tax literacy in Ukraine.

Big Data Analytics in IRS Audit Procedures and Its Effects on Tax Compliance: A Moderated Mediation Analysis

ABSTRACTBig Data analytics could be a panacea for the IRS by enabling creation of taxpayer profiles to better capture noncompliance using artificial intelligence and machine learning, requiring fewer costly manpower hours. Privacy, fair information practices, and embedded biases are critiques of such practices, and it is unknown how taxpayers will respond. Deterrence theory suggests improved audit effectiveness will increase compliance but excludes elements of tax morale, including perceived fairness. We find evidence supporting a moderated mediation model where procedural fairness mediates the relationship between audit procedures and tax compliance, moderated by participatory monitoring, which captures how effects vary when taxpayers willingly increase traceability of their income by advertising online. When taxpayers advertise business online, use of advanced technologies in audit selection significantly increases compliance with no significant effect on perceived fairness; when they do not, use of advanced technologies has no effect on compliance, but significantly decreases perceived fairness.

Taxing Micro, Small and Medium Enterprises in Yogyakarta: Regulation and Compliance

<p>Government Regulation No. 46/2013 has not been optimal in providing legal compliance on taxation for Micro, Small, and Medium Enterprises (MSMEs), especially in Yogyakarta. This policy was evaluated and amended with Government Regulation No. 23/2018. The amendment in tax policy for MSME actors was this research background to examine: First, how does the final income tax policy impact MSME taxpayers' compliance in Yogyakarta? Second, what are the legal compliance constraints of MSME taxpayers? The method used in this research was a juridical empirical, supported with the statute and conceptual approach. The results showed that the amendment in the final income tax tariff policy from 1% to 0.5%, as well as provide legal certainty of the timeframe of taxation had a positive impact on increasing taxpayer compliance. There was an increase in the number of taxpayers to 41,000 in 2019, or an increase of 15.5% compared to the number of taxpayers in 2017. However, tariff reduction has not been the answer to taxpayer non-compliance, the Regional Office of the Directorate General of Taxes of the Special Region of Yogyakarta still found tax avoidance. Tax compliance constraints were also caused by taxpayers' distrust of the government, poor tax morale, and tax knowledge. The government needs to conduct a cooperative compliance approach in taxation policies based on trust and dialogue between taxpayers and the government to improve MSME taxpayer compliance.</p><p><strong>Keywords:</strong> Tax Compliance; Final Income Tax Regulation; Micro; Small; Medium Enterprises.</p>

Social capital and the shadow economy: a Bayesian analysis of the BRICS

PurposeThe paper aims to examine the impact of social capital on the size of the shadow economy in the BIRCS countries over the period 1995–2014.Design/methodology/approachThe authors employ the Bayesian linear regression method to uncover the relationship between social capital and the shadow economy. The method applies a normal distribution for the prior probability distribution while the posterior distribution is determined using the Markov chain Monte Carlo technique.FindingsThe results indicate that the unemployment rate and tax burden positively affect the size of the shadow economy. By contrast, corruption control and trade openness are negatively associated with the development of this informal sector. Moreover, the paper's primary finding is that social capital represented by social trust and tax morale can hinder the size of the shadow economy.Research limitations/implicationsThis study is limited to the case of the BRICS countries for the period 1995–2014. The determinants of the shadow economy in different groups of countries can be heterogeneous. Moreover, social capital is a multidimensional concept that may consist of various components. This difficulty of measuring the social capital calls for further research on the relationship between other dimensions of social capital and the shadow economy.Originality/valueMany studies investigate the effect of economic factors on the size of the shadow economy. This paper applies a new approach to discover the issue. Notably, the authors use the Bayesian linear regression method to analyze the relationship between social capital and the shadow economy in the BRICS countries.

ON SOME PROBLEM ISSUES RELATED TO LIBERALIZATION OF THE TAX SYSTEM IN GEORGIA

The article looks into the phases of reforming the tax system of Georgia in term of its liberalization. Since the early 2000s, the tax system of Georgia has undergone a significant transformation. There were reduced both the number of taxes and tax rates. Anti-corruption measures were taken, the legal framework was improved, and tax services were changed over to e-services. Tax administration was considerably simplified, but also at the same time was strengthened. The level of fiscal discipline was increased. As a result, despite the seeming release of tax pressure, tax revenues for the treasury were increased manifold. It is clear that success of tax liberalization at this stage of the reform was largely due to the reform of the tax administration system. Higher fines were imposed for violators of tax discipline, which was reflected in severe tightening of tax administration due to the disruption of the corruption environment. A positive link was confirmed between tax liberalization measures and streamlining of the tax administration system in terms of successful tax reform. A number of innovations have been introduced, including: simplified and mostly electronic-automated service procedures, special tax statuses for small and micro entrepreneurs, the so-called "Estonian" model of the taxation of enterprises, the possibility of concluding a tax agreement, a warning mechanism as an alternative to monetary penalties, and so on. It should be noted that over the years, measures to relief, forgive or partially reduce tax debts accumulated in previous periods have become an accompanying and distinctive attribute of the significant ongoing reforms in the tax system. This process has become particularly large-scale since 2015. Just in 2015-2019, more than 68 billion taxpayers owed more than 3.5 billion GEL in terms of both basic taxes and fines. We believe that the unambiguously positive assessment of these large-scale measures for debt relief would not be correct. Of course, such measures relieve the tax administration system of the burden of recovering uncollectible debts. The International Monetary Fund and other donor organizations also require and welcome this. The advantages of this process, as well as related risks and possible threats are being discussed. It is noted that consistent use of such mechanisms leads to long-term negative fiscal consequences, as it undermines tax morality of taxpayers and prevents the introduction of a culture of tax compliance. The tax amnesties, especially if they are recurrent, encourage an anti-competitive environment and generate a sense of unfairness among conscious taxpayers. Destructive expectations are created, which leads to the transformation of the taxpayer behavior model in the wrong direction. These trends are evident in the case of Georgia according to statistical data. We believe that the final result of the tax reforms will depend to a great degree on the ability of the tax administration system and the state in general to prevent the possibility of the new tax amnesties in the future. It is necessary to create the preventive mechanisms that largely exclude possible recurrences of both debt relief of taxable objects and the accumulation of unpaid amounts of taxes.

Envelope wages as a new normal? An insight into a pool of prospective quasi-formal workers in the European Union (EU)

PurposeIn spite of millions of quasi-formal workers in the European Union (EU), there is still limited understanding of what motivates workers to participate in these detrimental employment schemes, and why certain groups of workers exhibit higher inclination towards it. This article takes a novel approach by putting prospective envelope wage earners in the centre of this analysis.Design/methodology/approachData from the 2019 Special Eurobarometer on undeclared work are used, and two-level random intercept cumulative logit modelling is applied.FindingsOne in seven fully declared EU workers would have nothing against receiving one part of their wages off-the-books. Manual workers and individuals whose job assumes travelling are the most willing to accept such kind of remuneration, and the same applies to workers with low tax morale and those who perceive the risk of being detected and persecuted as very small. On the other hand, women, older individuals, married persons and employees from large enterprises express the smallest inclination towards envelope wages. The environment in which an individual operates also plays a non-negligible role as the quality of the pension system and the strength of social contract were also identified as significant determinants of workers' readiness to accept envelope wages.Originality/valueThis article fills in the gap in the literature by analysing what workers think about wage under-reporting and what factors drive their willingness to accept envelope wages.

Can rewards foster honest tax behaviors?

Tax rewards are an important and useful fiscal policy tool for governments and tax administrations to plan strategies to increase tax revenue. Nevertheless, there is little clear empirical evidence of a positive effect of tax rewards on tax compliance; rather, in some cases a negative effect is even found. Consequently, this study considers a tax reward in the simplest form of a “negative penalty” (positive amount of money) in case of no tax evasion, instead of no penalty (as in the standard model). By making the tax system fairer, this kind of tax reward can spur tax morale and, thus, tax compliance. Tax rewards, therefore, could trigger a virtuous circle for increasing tax revenue. A survey study in Italy substantiates the main prediction of the theoretical model.

Immigration and tax morale: the role of perceptions and prejudices

Immigration and tax morale: the role of perceptions and prejudices

Factors Affecting Tax Evasion Intention During Pandemic

Abstract Introduction. Tax evasion is the act of active resistance from taxpayers to minimize or eliminate tax payment obligations. During COVID 19 pandemic situation, the increase of tax evasion will reduce tax income, so that the causes and solutions must be identified. This study uses primary data in the form of respondents' responses to the statements in the questionnaire. The samples of this study are 127 taxpayers’ who are located in Palembang and have a wholesale and retail trade, repair, and maintenance of cars and motorbikes business classification. The hypotheses of this study are tested using Partial Least Square. Purpose. This study aims to determine the factors affecting taxpayers’ intention to engage in tax evasion during pandemic using the Theory of Planned Behavior framework, namely the effect of taxpayers’ attitude toward tax evasion which is represented by tax morale, social norms, and perceived behavioral control which is represented by tax authority supervision toward taxpayers. Results. The results show that in a pandemic situation, taxpayers’ intention to engage in tax evasion is decreased as tax morale, social norms, and supervision by tax authorities increased. However, only tax morale and supervision by the tax authorities significantly affect taxpayers’ intention to engage in tax evasion during a pandemic situation, while social norms’ effect is insignificant. Conclusion. The result implied that the tax agency is expected to include taxation in the educational curriculum, implement the Whistleblowing System with appropriate rewards and punishments, and improve coordination with third parties in the framework of supervision. Although uses a small number of samples and has the possibility of high subjectivity in respondents' answers, this study has been able to describe the possible factors that cause a change in taxpayers’ behavior during a pandemic situation, especially their intention to engage in tax evasion, using Theory of Planned Behavior framework as consideration for tax authorities to establish evidence-based policies of taxation during a pandemic situation.

PENGGELAPAN PAJAK TINJAUAN MORAL PERPAJAKAN (STUDI KASUS KANTOR PELAYANAN PAJAK PRATAMA MAKASSAR SELATAN)

This study aims to determine the Tax evasion of the Moral Review of Taxation (Study of South Makassar Pratama Tax Office). This research method uses descriptive qualitative research.The results of the study have explained that in knowing how the government can improve tax morale so as to minimize tax evasion at South Makassar KPP is to warn taxpayers about the importance of paying taxes in order to avoid tax sanctions. This is also done in order to improve taxpayer tax morale as seen from the sub-concepts of Pre-Conventional Stages, Conventional Stages, Post-conventional Stages, Attitudes towards Behavior, Subjective Norms, and Behavioral Control. Whereas in discussing the causes of taxpayers to commit tax evasion, it can be seen from financial statement analysis, sales analysis, or contract analysis, then after finding an irregularity in the taxpayer's financial report, an interview can be conducted with the taxpayer to find out the indication of fraud, namely the taxpayer who is has indications of committing fraud based on pressure, opportunity, rationalization, ability, or arrogance.

Tax Morale as Perceived by Accounting Professionals

This study evaluates taxpayer morale through the perception of accounting professionals, specifically whether there is an impact from i) penalties, ii) tax audit probability, iii) rewards, and iv) tax amnesties. A perception survey with accountants is more reliable than with the taxpayers because they tend to report accurate perceptions, knowing close the degree of tax morale of their clients. Based on the literature, it is observed that taxpayer behavior has been analyzed by the rational economic model and the so-called crime paradigm, which relied on the idea that taxpayers would be potential offenders, aiming only at advantages. With a multidisciplinary approach with a sociological and psychological perspective, tax morale was measured through a self-applied questionnaire, showing higher or lower accountants' perception on tax morale of taxpayers concerning the incentives analyzed captured from 344 Brazilian accountants. The research findings indicate that the application of punishments and penalties are the most potent instruments for raising tax compliance, along with the perceived likelihood of an audit. In contrast, the successive application of tax amnesty programs erodes tax morale. This research is relevant because it deepens the understanding of what legislators and tax administration can do or not do to encourage greater tax morale.

SELF ASSESSMENT IMPROVEMENT STRATEGIES (TAXPAYER COMPLIANCE, TAXPAYER INSPECTION, AND TAX MORALE APPROACH)

Self-assessment system approach is a system in which taxpayers are given the authority to report their own income to the tax service office. The purpose of this research is to explore the implementation and strategies to support in improving the self-assessment system in KPP Pratama Kendari City. This study describes taxpayer compliance, tax audit, and self-assessment system strategies through the tax morale approach. The results of this study indicate that the implementation of taxpayer compliance still needs to be improved, tax audits have been carried out optimally, and tax morale raises three topics, namely trust in government, trust in court and legal systems, and trust in tax officials.

Shedding light inside the black box of implementation: Tax crimes as a predicate crime for money laundering

AbstractEven perfect transposition of EU Directives does not necessarily translate into homogeneous rules or application of rules across the European Union. Europeanization literature focused on the formal transposition of EU Directives. Newer studies suggest looking into the black box of how this translates into law in action. The 4th Anti‐Money Laundering Directive incorporated taxes as a predicate crime for money laundering. We analyze how and why this Directive has been implemented so differently across EU countries both in the books and in action through a novel dataset. We find that country characteristics can explain formal transposition patterns and influence the domestic adaptation of regulation as well as how practitioners, the second front line of implementation, use these rules in action. We find that corruption, government effectiveness, regulatory quality, tax morale, and tax administrative capacity are important factors to explain lingering differences in the books and in action among EU Member States.

The effect of personality traits and tax morale on tax evasion intention

PurposeThis paper aims to explore the relationship among personality traits, tax morale and tax evasion intention of students. Using the five-factor model of personality ratings, this study hypothesizes that agreeableness, openness to experience, conscientiousness, extraversion and neuroticism are good predictors of both tax morale and tax evasion intentions of individuals. Further, this paper argues that tax morale correlates negatively with tax evasion intention.Design/methodology/approachA survey method was adopted and questionnaires were developed to elicit responses for the study. The study hypotheses were tested structurally using the partial least square-structural equation modelling technique.FindingsThe results of the study demonstrate the existence of a positive and statistically significant relationship between three dimensions of the personality traits (agreeableness, conscientiousness and openness to experience) and tax morale. Consistent with the expectation, the study also finds tax morale to be significant and negatively associated with tax evasion intention.Research limitations/implicationsThis study concludes from the findings that improving the tax morale of individuals could be an important way by which tax authorities can improve voluntary tax compliance and reduce the incidence of tax evasion by individuals.Originality/valueThe study uses all the dimensions of the five-factor model to examine the tax evasion intention of individuals. It also contributes to the theoretical literature by highlighting the mediating role of tax morale in the relationship between personality traits and tax evasion intention from an African perspective.