Tax ethics and tax compliance: Evidence from emerging markets

Abstract

The purpose of this paper is to investigate the major factors that impact the level of tax ethics and tax compliance in Jordan. Furthermore, the paper addresses under which circumstances tax evasion could be accepted in order to highlight the differences between the tax ethics of Jordanian citizens and those of citizens of other countries. This research was conducted using a questionnaire survey, involving tax auditors, Jordanian Certified Public Accountants (JCPA holders), and financial managers of shareholding companies registered at Amman Stock Exchange (ASE). The paper reveals that Jordanian citizens do not evade taxes due to probable personal gains but rather because they believe that the state is incompetent in the appropriate allocation of public money and that the current political and tax system is ineffective or corrupt. Our results show that tax ethics is affected by determinants under three stages in terms of their importance in shaping taxpayers’ choices. First, it is taxpayers’ perception of their governments’ credibility; since governmental corruption might justify tax non-compliance. By contrast, efficient governmental tax revenue expenditure avenues had a negative impact on tax non-compliance decisions. The second stage includes when the taxation system is perceived as unjust, when the tax rates are too high, and when the taxpayers are facing financial constraints, these circumstances were the central determinants of tax ethics and had a positive impact on tax non-compliance decisions. The third stage involves the surrounding referent groups since they have either a positive or negative effect on taxpayers’ decisions to evade tax, at least partly, in their communities or societies. In addition to the referent group, audit rates, and penalty rates are involved in the third stage. We argue that for tax evasion to be checked and for tax compliance to acquire normative ethical connotations, the state needs to stop fiddling with the tax system and try, instead, to create a high-trust culture. The key to this is for the state to establish its own credibility first.

Reevaluating Ethical Justifications for Discriminatory Tax Rates in the Global Economy

“…Instead of the benefits received concept, such a system is based on the ability to pay premise (Kendrick, 1939;Bizioli & Reimer, 2020). A tax with graded rates is less ideal than one with a uniform rate for all individuals because the benefits received principle should take precedence over the ability to pay principle 4 . This is the case not just because it is fundamentally fair but also because it is simpler, and complexity should be avoided in favor of simplicity (Paul, 1997;McGee, 2003;Ghani et al, 2020).…”

“…It may be argued that since the rich have more property to defend than the poor do, it is only right that the rich pay more overall (Posner, 2014; Adam and Miller, 2021). It would seem reasonable that individuals with more property would pay more overall for government services than those 4 The ability to pay principle and the benefits received principle are based on two different and conflicting views of government. Under the ability to pay principle, government is viewed as the master and the people as servants.…”