What Drives Tax Morale? A Focus on Emerging Economies

South East European Journal of Economics and Business

Franić

Dzhekova

2015

This paper proposes a way of explaining the undeclared economy that represents participation in undeclared work as a violation of the social contract between the state and its citizens, and as arising when the informal institutions comprising the norms, values and beliefs of citizens (civic morality) do not align with the codified laws and regulations of a society's formal institutions (state morality). Drawing upon evidence from 1,018 face-to-face interviews conducted in Bulgaria during 2013, the finding is that the greater is the asymmetry between formal and informal institutions (i.e., citizens' civic morality and state morality), the greater is the likelihood of participation in the undeclared economy, and vice versa. The outcome is that tackling the undeclared economy requires a focus upon reducing this lack of alignment of formal and informal institutions. How this can be achieved in Bulgaria in particular and South-East Europe and beyond more generally, is then discussed. JEL codes: H26, J46, O17

Section: Methodsmentioning

confidence: 99%

Explaining the Undeclared Economy in Bulgaria: an Institutional Asymmetry Perspective

South East European Journal of Economics and Business

Franić

Dzhekova

2015

“…First, women are asserted to display a higher tax morale than men (Alm and Torgler, 2011;Daude et al, 2013;Kastlunger et al, 2013). Second, tax morale has been argued to increase positively with age (Daude et al, 2013;Lago-Peñas and Lago-Peñas, 2010).…”

Section: Variations In Tax Morale Across Population Groupsmentioning

confidence: 99%

Tackling the undeclared economy in the European Union: an evaluation of the tax morale approach

Industrial Relations Journal

Horodnic

2016

To evaluate a new approach towards tackling the undeclared economy, which views participants as social actors rather than rational economic actors, this article reports evidence from 27,563 face-to-face interviews conducted across the European Union during 2013. Multilevel logistic regression analysis reveals a strong association between participation in undeclared work and the level of tax morale. Finding that higher tax morale (and thus a lower propensity to engage in undeclared work) is strongly correlated with greater levels of state intervention but also with individual-level characteristics such as gender, age, education and employment status, the article concludes not only by confirming a political economy approach and refuting modernization and neo-liberal explanations and remedies, but also by revealing for the first time the importance of solutions not so far considered, including improving educational attainment, older citizens mentoring for younger people and improving women's participation in the labour force.

“…This has included a range of socio-demographic and socio-economic variables such as age, gender, education level, employment status, income level, marital status, social class and religiosity (Alm and Torgler, 2006;Cannari and D'Alessio, 2007;D'Arcy, 2011;Daude and Melguizo, 2010;Daude et al, 2013;Giachi, 2014;Kanniainen and Pääkkönen, 2009;Kastlunger et al, 2010Kastlunger et al, , 2013Lago-Peñas and Lago-Peñas, 2010;Martinez-Vazquez and Torgler, 2009;Russo, 2013;Torgler, 2004Torgler, , 2005aTorgler, ,b, 2006Torgler and Schneider, 2007;Williams and Martinez, 2014). The finding across a range of different contexts is that tax morale is lower among men, single people, the unemployed and self-employed, and increases with religiosity, age, perceived social status and income but is negatively related to years spent in formal education.…”

Section: Explaining the Shadow Economy: A Tax Morale Approachmentioning

confidence: 99%

An evaluation of the shadow economy in Baltic states: a tax morale perspective

Horodnic

2016

IJESB

To explain the shadow economy in the Baltic states of Estonia, Lithuania and Latvia, this paper evaluates the relationship between the shadow economy and tax morale. Viewing tax morale as a measure of the symmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic morality), the proposition is that the lower the tax morale (i.e., the greater the asymmetry between state morality and civic morality), the greater is the propensity to participate in the shadow economy. To evaluate this, a 2013 survey is reported involving 3,036 face-to-face interviews in these three Baltic nations. Using ordered logistic regression analysis, the finding is that the lower is the tax morale of individuals, population groups and countries, the greater is the propensity to participate in the shadow economy. The paper then explores the implications for theorising and tackling the shadow economy.