Religiosity and Tax Avoidance

Posted: 20 Oct 2012 Last revised: 25 Mar 2013

Jeff P. Boone

University of Texas at San Antonio - Department of Accounting

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

K. K. Raman

The University of Texas at San Antonio

Date Written: October 19, 2012

Abstract

In this paper, we examine religiosity as one determinant of tax avoidance by corporate and individual taxpayers. Prior research suggests a relation between religiosity and risk aversion. Because aggressive tax avoidance strategies involve significant uncertainty and possible penalties and damage to reputation, we predict that higher levels of religiosity are associated with less aggressive (i.e., less risky) tax positions. Consistent with this prediction, we find that firms headquartered in more religious US counties are less likely to avoid taxes. We also find that religiosity is consistently associated with lower tax avoidance by individual taxpayers as measured by underreported income. These results hold after controlling for several firm-level as well as county-level demographic characteristics identified in prior research as affecting tax avoidance by corporate and/or individual taxpayers. We conclude that religiosity is a significant determinant of tax avoidance by corporate and individual taxpayers.

Keywords: Tax avoidance, Religiosity

JEL Classification: M41

Suggested Citation

Boone, Jeff P. and Khurana, Inder K. and Raman, K. K., Religiosity and Tax Avoidance (October 19, 2012). Journal of American Taxation Association, Spring 2013, 35(1): 53-84.. Available at SSRN: https://ssrn.com/abstract=2164433

Jeff P. Boone

University of Texas at San Antonio - Department of Accounting ( email )

One UTSA Circle
San Antonio, TX 78249
United States

Inder Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

K. K. Raman (Contact Author)

The University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-8749 (Phone)

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