Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-22T19:04:24.792Z Has data issue: false hasContentIssue false

Is tax morale culturally driven?

Published online by Cambridge University Press:  23 February 2021

Luca Andriani*
Affiliation:
Department of Management, Birkbeck University of London, London, UK
Randolph Bruno
Affiliation:
School of Slavonic and East European Studies, University College London, London, UK IZA, Institute of Labor, Bonn, Germany Fondazione Rodolfo DeBenedetti, Milan, Italy
Elodie Douarin
Affiliation:
School of Slavonic and East European Studies, University College London, London, UK
Paulina Stepien-Baig
Affiliation:
School of Slavonic and East European Studies, University College London, London, UK
*
*Corresponding author. Email: luca.andriani@bbk.ac.uk

Abstract

Citizens' tax compliance should not only respond to the quality of formal institutions, but might also be culturally driven. We contribute to this literature by investigating whether tax morale, an individual's intrinsic non-pecuniary motivation to comply with taxes, is associated with the cultural values (following Hofstede's typology) held by this individual. The analysis exploits four waves of the European Values Survey (1981–2010) across 48 countries. The cultural dimensions are constructed through a polychoric principal component analysis on a set of relevant survey items consistent with Hofstede's definitions. Ordered logit estimations suggest that although values of individualism and femininity are associated with higher individual's tax morale, power distance and uncertainty avoidance are associated with lower tax morale. These results remain consistent as we increase the level of granularity of our investigation through within-region analyses and, subsequently, within-cohort analyses. We argue that these results inevitably enrich the emerging debate about cultural values and citizens' compliance with formal institutions. They also indicate that societal culture as well as individual values should be considered when designing policies aiming to improve tax compliance.

Type
Research Article
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alesina, A. and Giuliano, P. (2015), ‘Culture and Institutions’, Journal of Economic Literature, 53(4): 898944.CrossRefGoogle Scholar
Alesina, A., Giuliano, P. and Nunn, N. (2013), ‘On the Origins of Gender Roles: Women and the Plough’, Quarterly Journal of Economics, 128(2): 469530.CrossRefGoogle Scholar
Alm, J. and Torgler, B. (2006), ‘Culture Differences and Tax Morale in the United States and in Europe’, Journal of Economic Psychology, 27(2): 224246.CrossRefGoogle Scholar
Alm, G., Bernasconi, M., Laury, S., Lee, D. and Wallace, S. (2017), ‘Culture, Compliance and Confidentiality: Taxpayers Behavior in the United States and Italy’, Journal of Economic Behavior and Organization, 140(C): 176196.CrossRefGoogle Scholar
Banfield, E. (1958), The Moral Basis of a Backward Society, New York: Free Press.Google Scholar
Becker, G. S. (1974), Essays in the Economics of Crime and Punishment, New York: National Bureau of Economic Research distributed by Columbia University Press.Google Scholar
Berggren, N., Ljunge, M. and Nilsson, T. (2019), ‘Roots of Tolerance among Second-Generation Immigrants’, Journal of Institutional Economics, 15(6): 9991016.CrossRefGoogle Scholar
Beugelsdijk, S. and Welzel, C. (2018), ‘Dimensions and Dynamics of National Culture: Synthesizing Hofstede with Inglehart’, Journal of Cross-Cultural Psychology, 49(10): 14691505.CrossRefGoogle ScholarPubMed
Beugelsdijk, S., Maseland, R. and Van Hoorn, A. (2015), ‘Are Scores on Hofstede's Dimensions of National Culture Stable Over Time? A Cohort Analysis’, Global Strategy Journal, 5(3): 223240.CrossRefGoogle Scholar
Bowles, S. (1998), ‘Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions’, Journal of Economic Literature, 36(1): 75111.Google Scholar
Cline, B. N. and Williamson, C. (2017), ‘Individualism, Democracy, and Contract Enforcement’, Journal of Corporate Finance, 46(October): 284306.CrossRefGoogle Scholar
Cruz-García, P. and Peiró-Palomino, J. (2019), ‘Informal, Formal Institutions and Credit: Complements or Substitutes?’, Journal of Institutional Economics, 15(4): 649671.CrossRefGoogle Scholar
Cummings, R. G., Martinez-Vasquez, J., McKee, M. and Torgler, B. (2009), ‘Tax Morale Affects Tax Compliance: Evidence from Surveys and an Artefactual Field Experiment’, Journal of Economic Behaviour & Organization, 70(3): 447457.CrossRefGoogle Scholar
Dahlström, C. and Lapuente, V. (2017), Organising Leviathan: Politicians, Bureaucrats and the Making of Good Government, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Daude, C., Gutiérrez, H. and Melguizo, A. (2013), ‘What Drives tax Morale? A Focus on Emerging Economies’, Review of Public Economics, 207(4): 940.Google Scholar
Davis, L. S. and Williamson, C. (2019), ‘Does Individualism Promote Gender Equality?’, World Development, 123(November): 104627.CrossRefGoogle Scholar
De Jong, E. (2011), ‘Culture, Institutions and Economic Growth’, Journal of Institutional Economics, 7(4): 523527.CrossRefGoogle Scholar
Duranton, G., Rodríguez-Pose, A. and Sandall, R. (2009), ‘Family Types and the Persistence of Regional Disparities in Europe’, Economic Geography, 85(1): 2347.CrossRefGoogle Scholar
Feld, L. P. and Frey, B. S. (2002), ‘Trust Breeds Trust: How Taxpayers are Treated’, Economics of Governance, 3(July): 8799.CrossRefGoogle Scholar
Filippin, A., Fiorio, C. and Viviano, E. (2013), ‘The Effect of Tax Enforcement on Tax Morale’, European Journal of Political Economy, 32(December): 320331.CrossRefGoogle Scholar
Frey, B. S. (1997), Not Just for the Money. An Economic Theory of Personal Motivation, Cheltenham, UK: Edward Elgar.Google Scholar
Frey, B. S. and Torgler, B. (2007), ‘Tax Morale and Conditional Cooperation’, Journal of Comparative Economics, 35(1): 136159.CrossRefGoogle Scholar
Gorodnichenko, Y. and Roland, G. (2017), ‘Culture Institutions and the Wealth of Nations’, The Review of Economics and Statistics, 99(3): 402416.CrossRefGoogle Scholar
Greif, A. (1994), ‘Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualistic Societies’, Journal of Political Economy, 102(5): 912950.CrossRefGoogle Scholar
Greif, A. (2006), ‘Family Structure, Institutions, and Growth: The Origins and Implications of Western Corporations’, American Economic Review, 96(2): 308312.CrossRefGoogle Scholar
Greif, A. and Kingston, C. (2011), ‘Institutions: Rules or Equilibria?’, in Schofield, N., and Caballero, G. (eds), Political Economy of Institutions, Democracy and Voting, Heidelberg: Springer-Verlag, pp. 1343.CrossRefGoogle Scholar
Grimmelikhuijsen, S. and Porumbescu, G. (2013), ‘The Effect of Transparency on Trust in Government: A Cross-National Comparative Experiment’, Public Administration Review, 73(4): 575586.CrossRefGoogle Scholar
Guiso, L., Sapienza, P. and Zingales, L. (2004), ‘The Role of Social Capital in Financial Development’, American Economic Review, 94(3): 526556.CrossRefGoogle Scholar
Guiso, L., Sapienza, P. and Zingales, L. (2006), ‘Does Culture Affect Economic Outcomes?’, Journal of Economic Perspectives, 20(2): 2348.CrossRefGoogle Scholar
Guiso, L., Sapienza, P. and Zingales, L. (2016), ‘Long-Term Persistence’, Journal of the European Economic Association, 14(6): 14011436.CrossRefGoogle Scholar
Hair, J., Black, W., Babin, B. J. and Anderson, R. (2014), Multivariate Data Analysis (Seventh Edition), Harlow: Pearson.Google Scholar
Hakhverdian, A. and Mayne, Q. (2012), ‘Institutional Trust, Education, and Corruption: A Micro-Macro Interactive Approach’, Journal of Politics, 74(3): 739750.CrossRefGoogle Scholar
Hodgson, G. M. (2006), ‘What are Institutions?’, Journal of Economic Issues, 40(1): 125.CrossRefGoogle Scholar
Hodgson, G. and Jiang, S. (2007), ‘The Economics of Corruption and the Corruption of Economics: An Institutionalist Perspective’, Journal of Economic Issues, 41(4): 10431061.Google Scholar
Hofstede, G. (1980), Culture's Consequences: International Differences in Work-Related Values, Beverly Hills, CA: Sage Publications.Google Scholar
Hofstede, G. (2001), Culture's Consequences: Comparing Values, Behaviors, Institutions and Organisations across Nations, Beverly Hills, CA: SAGE Publications.Google Scholar
Hofstede, G., Hofstede, G. and Minkov, M. (2010), Cultures and Organisations: Software of the Mind. Intercultural Cooperation and Its Importance for Survival, New York: McGraw Hill.Google Scholar
Hooghe, M., Dassonneville, R. and Marien, S. (2015), ‘The Impact of Education on the Development of Political Trust: Results from A Five-Year Panel Study among Late Adolescents and Young Adults in Belgium’, Political Studies, 63(1): 123141.CrossRefGoogle Scholar
House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W. and Gupta, V. (2004), Culture, Leadership and Organizations: The GLOBE Study of 62 Societies, London, England: SAGE.Google Scholar
Kaasa, A. (2015), ‘Culture, Religion and Social Capital: Evidence from European Regions’, International Journal of Sociology and Social Policy, 35(11/12): 772794.CrossRefGoogle Scholar
Kaasa, A. and Minkov, M. (2020), ‘Are the Worlds’ National Cultures Becoming More Similar?’, Journal of Cross-Cultural Psychology, 52(7–8): 531550.CrossRefGoogle Scholar
Kolenikov, S. and Angeles, G. (2004), The Use of Discrete Data in PCA: Theory, Simulations, and Applications to Socioeconomic Indices. Chapel Hill: Carolina Population Center, University of North Carolina, 20, pp. 159.Google Scholar
Kountouris, Y. and Remoundou, K. (2013), ‘Is there a Cultural Component in Tax Morale? Evidence from Immigrants in Europe’, Journal of Economic Behavior and Organization, 96(December): 104119.CrossRefGoogle Scholar
Kyriacou, A. P. (2016), ‘Individualism-Collectivism, Governance and Economic Development’, European Journal of Political Economy, 42(1): 91104.CrossRefGoogle Scholar
Lago-Penas, I. and Lago-Penas, S. (2010), ‘The Determinants of tax Morale in Comparative Perspective: Evidence from European Countries’, European Journal of Political Economy, 26(4): 441453.CrossRefGoogle Scholar
Licht, A., Goldschmidt, C. and Schwartz, S. (2007), ‘Culture Rules: The Foundations of the Rule of law and Other Norms of Governance’, Journal of Comparative Economics, 35(4): 659688.CrossRefGoogle Scholar
Luttmer, E. F. P. and Singhal, M. (2014), ‘Tax Morale’, Journal of Economic Perspectives, 28(4): 149–116.CrossRefGoogle Scholar
Mahoney, J. and Thelen, K. (2009), ‘A Theory of Gradual Institutional Change’, in Mahoney, J., and Thelen, K. (eds), Explaining Institutional Change, Cambridge, UK: Cambridge University Press, pp. 137.CrossRefGoogle Scholar
Moser, C. and Felton, A. (2009), ‘The Construction of an Asset Index. Measuring Asset Accumulation in Ecuador’, in Addison, T., Hulme, D., and Kanbur, R. (eds), Poverty Dynamics: Interdisciplinary Perspectives, Oxford: OUP, pp. 102127.CrossRefGoogle Scholar
North, D. C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
North, D. C. (2008), ‘Institutions and the Performance of Economies Over Time’, in Ménard, C., and Shirley, M. M. (eds), Handbook of New Institutional Economics, Berlin, Heidelberg: Springer, pp. 2130.CrossRefGoogle Scholar
Orviska, M. and Hudson, J. (2003), ‘Tax Evasion, City Duty and the Law Abiding Citizen’, European Journal of Political Economy, 19(1): 83102.CrossRefGoogle Scholar
Ostrom, E. (2010), ‘Beyond Markets and States: Polycentric Governance of Complex Economic System’, American Economic Review, 100(3): 641672.CrossRefGoogle Scholar
Putnam, R. D., Leonardi, R. and Nanetti, R. Y. (1993), Making Democracy Work, Princeton: Princeton University Press.Google Scholar
Ricciuti, R., Savoia, A. and Sen, K. (2019), ‘How Do Political Institutions Affect Fiscal Capacity? Explaining Taxation in Developing Economies’, Journal of Institutional Economics, 15(2): 351380.CrossRefGoogle Scholar
Richardson, G. (2006), ‘Determinants of tax Evasion: A Cross-Country Investigation’, Journal of International Accounting, Auditing and Taxation, 15(2): 150169.CrossRefGoogle Scholar
Richardson, G. (2008), ‘The Relationship Between Culture and Tax Evasion Across Countries: Additional Evidence and Extensions’, Journal of International Accounting Auditing and Taxation, 17(2): 6778.CrossRefGoogle Scholar
Savoia, A. and Sen, K. (2015), ‘Measurement, Evolution, Determinants and Consequences of State Capacity: A Review of Recent Research’, Journal of Economic Surveys, 29(3): 441458.CrossRefGoogle Scholar
Schwartz, S. H. (2011), ‘Values: Cultural and Individual’, in van de Vijver, F. J. R., Chasiotis, A. and Breugelmans, S. M. (eds.), Fundamental Questions in Cross-Cultural Psychology, Cambridge: Cambridge University Press, pp. 463493.CrossRefGoogle Scholar
Spranz, R., Lenger, A. and Goldschmidt, N. (2012), ‘The Relation Between Institutions and Cultural Factors in Economic Development: The Case of Indonesia’, Journal of Institutional Economic, 8(4): 459488.CrossRefGoogle Scholar
Tabellini, G. (2008), ‘Institutions and Culture’, Journal of the European Economic Association, 6(2-3): 255294.CrossRefGoogle Scholar
Tabellini, G. (2010), ‘Culture and Institutions: Economic Development in the Regions of Europe’, Journal of the European Economic Association, 8(4): 677716.CrossRefGoogle Scholar
Tarabar, D. (2017), ‘Culture, Democracy and Market Reforms: Evidence from Transition Countries’, Journal of Comparative Economics, 45(3): 456480.CrossRefGoogle Scholar
Tarabar, D. (2019), ‘Does National Culture Change as Countries Develop?’, Evidence from generational cleavages Journal of Institutional Economics, 15(3): 397412.CrossRefGoogle Scholar
Taras, V., Rowney, J. and Steel, P. (2009), ‘Half a Century of Measuring Culture: Review of Approaches, Challenges, and Limitations Based on the Analysis of 121 Instruments for Quantifying Culture’, Journal of International Management, 15(4): 357373.CrossRefGoogle Scholar
Tavits, M. (2010), ‘Why Do People Engage in Corruption? The Case of Estonia’, Social Forces, 88(3): 12571280.CrossRefGoogle Scholar
Torgler, B. (2005), ‘Tax Morale in Latin America’, Public Choice, 122(1–2): 133157.CrossRefGoogle Scholar
Torgler, B. (2006), ‘The Importance of Faith: Tax Morale and Religiosity’, Journal of Economic Behavior & Organization, 61(1): 81109.CrossRefGoogle Scholar
Torgler, B. (2012), ‘Tax Morale, Eastern Europe and European Enlargement’, Communist and Post-Communist Studies, 45(1–2): 1125.Google Scholar
Torgler, B. and Schneider, F. (2007), ‘What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries’, Social Science Quarterly, 88(2): 443470.CrossRefGoogle Scholar
Traxler, C. (2010), ‘Social Norms and Conditional Cooperative Taxpayers’, European journal of Political Economy, 26(1): 89103.CrossRefGoogle Scholar
Tsakumis, G., Curatola, A. and Porcano, T. (2007), ‘The Relation Between National Cultural Dimensions and Tax Evasion’, Journal of International Accounting, Auditing and Taxation, 16(2): 131147.CrossRefGoogle Scholar
Williamson, C. (2009), ‘Informal Institutions Rule: Institutional Arrangements and Economic Performance’, Public Choice, 139(3): 371387.CrossRefGoogle Scholar
Wingate, M. (1997), ‘An Examination of Cultural Influence on Audit Environments’, Research in Accounting Regulation, 10A(Suppl. 1): 129148.Google Scholar
Zanella, G. and Bellani, M. M. (2019), The Volatility of Survey Measures of Culture and Its Consequences’, IZA Discussion Papers 12730, Institute of Labor Economics (IZA).CrossRefGoogle Scholar