The Last Refuge of a Scoundrel? Patriotism and Tax Compliance

38 Pages Posted: 7 Apr 2009

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Salmai Qari

German Institute for Economic Research (DIW Berlin); Berlin School of Economics and Law

Multiple version iconThere are 4 versions of this paper

Date Written: March 2009

Abstract

We study the effects of patriotism on tax compliance. If individuals feel a (random) patriotic warm glow from honest tax compliance, this has implications for optimal auditing and tax compliance. A higher expected warm glow reduces the government's optimal audit probability and yields higher tax compliance. Also, individuals with higher warm glow are less likely to evade taxes. This prediction is confirmed empirically by a multivariate analysis on the individual level while controlling for several other potentially confounding factors. The findings survive a variety of robustness checks, including an instrumental variables estimation to tackle the possible endogeneity of patriotism. On the aggregate level, we provide evidence for a negative correlation between average patriotic warm glow and the size of the shadow economy across several countries.

Keywords: patriotism, tax evasion, warm glow

JEL Classification: H26, K42

Suggested Citation

Konrad, Kai A. and Qari, Salmai, The Last Refuge of a Scoundrel? Patriotism and Tax Compliance (March 2009). CEPR Discussion Paper No. DP7215, Available at SSRN: https://ssrn.com/abstract=1372535

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, 53072
Germany

Salmai Qari

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Berlin School of Economics and Law ( email )

Badensche Strasse 50-51
Berlin, D-10825
Germany

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