Religiosity and Tax Compliance: Evidence from U.S. Counties

19 Pages Posted: 15 Jan 2016 Last revised: 10 Mar 2020

See all articles by Sanghyun Hwang

Sanghyun Hwang

Sangmyung University

Kadir Nagac

Roger Williams University

Date Written: March 1, 2020

Abstract

The intention of this paper is to analyze religiosity as a factor that potentially affects tax compliance. Studies in the 90s have shown that the puzzle of tax compliance is "why so many individuals pay their taxes" and not "why people evade taxes". It has been noted that compliance cannot be explained entirely by the level of enforcement (Graetz and Wilde, 1985; Efflers, 1991). Countries set the levels of audit and penalty so low that most individuals would evade taxes, if they were rational, because it is unlikely that cheaters will be caught and penalized. Nevertheless, a high degree of compliance is observed. Therefore, studies that analyze a variety of factors other than detection and punishment are need. Religiosity can play an important role in determining one's tax compliance decision. I use religious adherence data from the American Religious Data Archive and reported income data from IRS to analyze independent effects of church adherence rates on tax compliance in the United States at the county-level. Tax compliance at the county-level is measured as discrepancy in reported income between IRS data and census data. Existing studies focus on effect of religiosity on tax fraud acceptability (tax morale), not the actual tax fraud or tax compliance behavior. To writer's knowledge, this study is the first study that analyzes the effect of religiosity on actual tax compliance behavior.

Suggested Citation

Hwang, Sanghyun and Nagac, Kadir, Religiosity and Tax Compliance: Evidence from U.S. Counties (March 1, 2020). Available at SSRN: https://ssrn.com/abstract=2715508 or http://dx.doi.org/10.2139/ssrn.2715508

Sanghyun Hwang

Sangmyung University ( email )

20, Hongjimun 2-gil, Jongno-gu
Seoul, 03016
Korea, Republic of (South Korea)
82-2-2287-6136 (Phone)

Kadir Nagac (Contact Author)

Roger Williams University ( email )

Bristol, Rhode Island, USA.
Bristol, RI
United States

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