Understanding Tax Evasion: Combining the Public Choice and New Institutionalist Perspectives

Klarita Gërxhani and Ronald Wintrobe
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Ronald Wintrobe: Western University London

Chapter 30 in The Palgrave Handbook of Comparative Economics, 2021, pp 785-810 from Springer

Abstract: Abstract In this chapter, we propose to complement the public choice theory by incorporating insights from new institutionalism and the tax morale literature. More specifically, we show the relation between concepts like trust, social capital, solidarity, and reputation. By focusing on “trust-based political exchange”, we argue that tax evasion is related to the degree to which citizens trust the government to be honest and to provide services promised, and the degree to which they believe their fellow citizens pay their taxes. This is tested using two hypotheses, relating individual tax evasion to the extent to which citizens support the government and believe it is not corrupt and to which they believe others are paying taxes, respectively. The empirical data support the theoretical hypotheses.

Keywords: Tax evasion; Public choice; Institutions; Transition; Trust (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/978-3-030-50888-3_30

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