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Culture differences and tax morale in the United States and in Europe

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  • Alm, James
  • Torgler, Benno

Abstract

In recent years much research has investigated whether values, social norms, and attitudes differ across countries and whether these differences have measurable effects on economic behavior. One area in which such studies are particularly relevant is tax compliance, given both the noted differences across countries in their levels of tax compliance and the marked inability of standard economic models of taxpayer compliance to explain these differences. In the face of these difficulties, many researchers have suggested that the intrinsic motivation for individuals to pay taxes ? what is sometimes termed their ?tax morale? ? differs across countries. However, isolating the reasons for these differences in tax morale is notoriously difficult. In a common approach, studies sometimes referred to as ?cultural studies? have often relied upon controlled laboratory experiments conducted in different countries because such experiments can be set up with identical experimental protocols to allow cultural effects to be isolated. In this paper we first analyze a cross-section of individuals in Spain and the United States using the World Values Survey (WVS). In line with previous experiments, our findings indicate a significantly higher tax morale in the United States than in Spain, controlling in a multivariate analysis for additional variables. We then extend our multivariate analysis to include 14 European countries in the estimations. Our results again indicate that the United States has the highest tax morale across all countries, followed by Austria and Switzerland. We also find a strong negative correlation between the size of shadow economy and the degree of tax morale in those countries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 27 (2006)
Issue (Month): 2 (April)
Pages: 224-246

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Handle: RePEc:eee:joepsy:v:27:y:2006:i:2:p:224-246

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  1. Hessel Oosterbeek & Randolph Sloof & Gijs van de Kuilen, 2004. "Cultural differences in ultimatum game experiments: Evidence from a meta-analysis," Experimental 0401003, EconWPA.
  2. Pyle, D J, 1991. " The Economics of Taxpayer Compliance," Journal of Economic Surveys, Wiley Blackwell, vol. 5(2), pages 163-98.
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  8. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
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  11. Kirchler, Erich, 1998. "Differential representations of taxes: Analysis of free associations and judgments of five employment groups," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(1), pages 117-131.
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  13. Ronald G. Cummings & Jorge Martinez-Vazquez & Michael McKee & Benno Torgler, 2004. "Effects of culture on tax compliance: A cross check of experimental and survey evidence," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0403, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  14. Feld, Lars P & Tyran, Jean-Robert, 2002. "Tax Evasion and Voting: An Experimental Analysis," Kyklos, Wiley Blackwell, vol. 55(2), pages 197-222.
  15. Benno Torgler, 2003. "Tax Morale and Institutions," CREMA Working Paper Series 2003-09, Center for Research in Economics, Management and the Arts (CREMA).
  16. Alm, James & Sanchez, Isabel & de Juan, Ana, 1995. "Economic and Noneconomic Factors in Tax Compliance," Kyklos, Wiley Blackwell, vol. 48(1), pages 3-18.
  17. Bruno S. Frey & Lars P. Feld, 2002. "Deterrence and Morale in Taxation: An Empirical Analysis," CESifo Working Paper Series 760, CESifo Group Munich.
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