Tax Morale and Conditional Cooperation
39 Pages Posted: 11 May 2006
Date Written: April 2006
Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. A homo economicus, with a more refined motivation structure, helps us to shed light on this puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 West and East European countries. We find a high correlation between perceived tax evasion and tax morale. The results remain robust after exploiting endogeneity and conducting several robustness tests. We also observe a strong positive correlation between institutional quality and tax morale.
Keywords: tax morale, tax compliance, tax evasion, pro-social behavior, institutions
JEL Classification: H26, H73, D64
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