Tax morale and institutional theory: a systematic review

Abstract

Purpose-The purpose of this paper is to conduct a systematic review of the factors that shape tax morale. A large range of random explanatory variables identified in the literature as determinants of tax morale are synthesised and structured by drawing inspiration from the institutional theory. Design/methodology/approach-To do this, a systematic search has been conducted using a library catalogue which provides access to more than 400 databases. Findings-The finding is that the institutional theory provides a suitable theoretical basis to explore tax morale. Indeed, all the factors until now identified as determinants of tax morale (except the control variables/socio-demographic characteristics) can be categorised either as belonging to formal institutions or to informal institutions. The most salient factor is trust, with both vertical and horizontal trust positively related to tax morale. Research limitations/implications-The outcome is a call for a more nuanced understanding of not only the effect of formal and informal institutions on tax morale but also how formal and informal institutions interact and alter each other and, consequently, affect tax morale. Practical implications-The paper seeks to encourage governments to start recognising that as low tax morale arises when a gap exists between formal and informal institutions, they need to design policy measures aimed to reduce this gap, rather than persisting with deterrence measures. Originality/value-This is the first systematic review of the factors that influence tax morale using an institutionalist lens.

Explaining and Tackling Under-Declared Employment in FYR Macedonia: The Employers Perspective

“…However, it is unlikely that this will be effective unless formal institutions themselves change. On the other hand, therefore, there is also a need to change the formal institutions, such as by reducing the level of public sector corruption and improving procedural and distributive justice and fairness (Horodnic 2018;Horodnic and Williams 2018;Molero and Pujol 2012;Murphy 2005;Williams and Horodnic 2015a). There is also a need to improve horizontal trust.…”

An Institutional Theory of Tax Non- Compliance in Bulgaria: a Tax Morale Approach

“…Originally proposed in a seminal paper by Allingham and Sandmo (1972), this asserts that tax payers are non-compliant when the benefits of doing so are greater than the expected costs of being detected and fined. To tackle tax noncompliance, most governments therefore focus on increasing the actual or perceived probability of detection and level of penalties (e.g., Horodnic, 2018;ILO, 2017;Williams, 2014Williams, , 2018Williams and Puts, 2017). This is also the case in Bulgaria.…”

“…There has been an absence of studies on the tax morale of entrepreneurs. Studies on tax payers display that tax morale varies by socio-demographic characteristics such as age, gender, employment status, religiosity, marital status and social class (for a review, see Horodnic, 2018). However, there has been until now no data on whether tax morale varies by the characteristics of entrepreneurs such as the sector in which they work, their number of employees, and the legal status of their business.…”

Evaluating the Prevalence and Distribution of Unregistered Employment in Kosovo: Lessons from a 2017 Survey

“…Using data from the 2010 Life in Transition Survey (LiTS) for 35 Eurasian countries, Krasniqi and Williams (2017) find that on a country-level, meanwhile, the prevalence of unregistered employment is strongly associated with tax morale. Given that tax morale is positively related to education (Horodnic 2018) i.e. that informal employment is less acceptable by more educated individuals, hence less likely to engage in such relations.…”