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State Capacity and Tolerance towards Tax Evasion: First Evidence from Romania

Călin Vâlsan (), Elena Druica and Rodica Ianole-Călin ()
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Călin Vâlsan: Williams School of Business, Bishops’ University, Sherbrooke, QC J1M1Z7, Canada
Rodica Ianole-Călin: Faculty of Business and Administration, University of Bucharest, 030018 Bucharest, Romania

Administrative Sciences, 2020, vol. 10, issue 2, 1-18

Abstract: We investigate the level of tolerance towards tax non-compliance and the informal economy in Romania, using a sample of 250 respondents. This variable is determined by a complex set of latent variables that include, but is not limited to, state capacity, social and business norms, the perception of non-compliance, and the perception of distributive justice. We find that our respondents are intolerant towards tax evasion and the informal economy, but the level of intolerance is relatively mild. Using a partial least squares—path modeling approach, we also find that a weak state capacity and the perception of lack of distributive justice increases the level of tolerance. The perception of tax evasion stemming from media reports, and the respondents’ own self-enhancement bias, combine to push the level of tolerance lower.

Keywords: tax compliance; informal economy; state capacity; partial least square model (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2020
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