Public policies and tax evasion: evidence from SAARC countries

Abstract

In compliance with the socioeconomic theory, the study has strived to investigate the impact of economic and non-economic public policies on tax evasion using panel data of 7 SAARC countries covering the period from 1998 to 2015. The study has applied the ordinary least square with fixed effect and random effect models to analyze the data assembled. The result of the study implies that the higher the degree of economic freedoms, the lower the tax evasion. More specifically, the government policies about property rights, monetary freedom, fiscal freedom and investment freedom have a negative influence on taxpayers' choices of tax evasion while financial freedom result shows a positive effect on tax evasion. Additionally, there is a negative impact of public sector governance and religiosity on tax evasion, which implies the higher the public sector governance and the higher the religious faith amid the people, the lower the degree of tax evasion. The findings of the study are supposed to offer the governments, tax authorities, and research scholars the valuable insights into public policies for reducing the tax evasion to a significant extent.

Impact of Governance Quality and Religiosity on Tax Evasion: Evidence from OECD Countries

“…Torgler (2006) found that religious faith substantially impacts the taxpayers' tax morale behavior; it ultimately shapes the taxpayers' compliance behavior. Nurunnabi (2018) and Islam et al (2020) found religiosity as the most crucial factor that negatively influences TE. There is limited research on the effect of governance quality and religiosity on TE in OECD countries.…”

“…Several factors of socioinstitutional norms have been identified in prior research, which has effects on TE (Nurunnabi, 2018). Governance qualities (Umar et al, 2019;Yamen et al, 2018) and religiosity (Islam et al, 2020;Nurunnabi, 2018) may affect the tax behavior of society in particular. Nurunnabi (2018) identified three major playersthe state, the tax authority, and taxpayersin the tax social network within which they interact among themselves, which in turn affects TE.…”

“…Likewise, the moral sentiment theory infers religiosity as an act that shapes people's behavior toward internal moral force in tax payment (Smith & Smith, 2014). Islam et al (2020) found that people with religious faith have more moral sense and keep people away from all evil deeds and deter TE. Furthermore, Richardson and Sawyer (2001) suggested that contingency factors depend on the nature of the study.…”

“…Tax evasion (TE) is a widespread phenomenon, and it has been seen as the most controversial issue over the last few decades. It is considered a severe loss of government revenue, resulting in pressure on the government in providing public services smoothly (Islam, Rashid, Hossain, & Hashmi, 2020). In result, it also increases the tax burden not only on the government but also on compliant taxpayers and thereby demotivates them to comply with tax obligation properly.…”

Rural Assets Administration and Establishment of Village-Owned Enterprises for the Enhancement of Rural Economy

“…All these questions concern the problems faced by the institutions that make decisions regarding content, the procedures determined, the strategy, the timing of the decisions, and the implementation besides the conclusion about the definition of the policy as meant. At present, the term policy is more frequently and widely used concerning government actions and state behavior in general (Hardy et al, 2020;Islam et al, 2020). The policy is a tool or instrument to regulate the population from top to bottom.…”