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Tax Morale and Trust in Public Institutions

Wilfried Kouamé ()

Cahiers de recherche from Departement d'Economique de l'École de gestion à l'Université de Sherbrooke

Abstract: One significant puzzle in economics is to explain why people pay their taxes and why there are so many differences in tax compliance across countries. Tax morale literature has sought to tackle this puzzle with a sparse evidence from the relationship between taxpayers and public authorities. This paper sheds light on an important channel whereby trust in public institutions raises taxpayers’ willingness to comply. The theoretical framework goes beyond the standard model of tax evasion by allowing both social norms and the interactions with public institutions. The empirical approach uses the World Values Survey 2010-2014 to show the evidence that trust in public institutions increases tax morale. The findings suggest that in both advanced and developing countries, trust in public institutions is a key determinant of tax morale along with the social norms about tax compliance. The paper addresses endogeneity issues between tax morale and trust in public institutions using the historical data on slavery at the ethnic group level and the taxpayers voting behavior. The findings are robust using alternative identification strategy and additional control variables.

Keywords: public institutions; signal effects; tax morale; tax evasion; trust (search for similar items in EconPapers)
JEL-codes: D70 H26 H31 K42 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015-12, Revised 2017-10
New Economics Papers: this item is included in nep-iue, nep-law, nep-pbe, nep-pub and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:shr:wpaper:15-14

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