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The Relationship between Tax Evasion and Corruption. A Cross-country Examination

In: 1st International Conference Global Ethics - Key of Sustainability (GEKoS)

Author

Listed:
  • Cristina Timofte (Coca)

    (Åžtefan cel Mare University, Suceava, Romania)

  • Dorel Mates

    (West University, Timisoara, Romania)

  • Dan-Andrei Coca

    (Åžtefan cel Mare University, Suceava, Romania)

  • Simona-Maria Tanasa (Brinzaru)

    (Åžtefan cel Mare University, Suceava, Romania)

Abstract

This article investigates the relationship between tax evasion and corruption, in order to determine if there can be found a significant connection between the two, and in order to test previous research results that found tax evasion as being positively related to corruption. Moreover, the research examines if tax evasion could be predicted based on data regarding corruption. To this extent, theoretical hypothesis on how corruption influences tax evasion were developed and empirically tested. The research was carried on a cross-country data for the 28 European Union’s Member States for the period 2012 - 2017 and it used IBM SPSS Statistics 20 in order to analyze and interpret the results. The main finding is that corruption is statistically significantly related to tax evasion and that such relationship is a positive one, as highly corrupt countries also register high levels of tax evasion – as measured by the proxy values used. These findings could be of great use for policymakers all around the world, as a policy against corruption could have major implications on tax evasion and vice versa.

Suggested Citation

  • Cristina Timofte (Coca) & Dorel Mates & Dan-Andrei Coca & Simona-Maria Tanasa (Brinzaru), 2020. "The Relationship between Tax Evasion and Corruption. A Cross-country Examination," Book chapters-LUMEN Proceedings, in: Adriana Grigorescu & Valentin Radu (ed.), 1st International Conference Global Ethics - Key of Sustainability (GEKoS), edition 1, volume 11, chapter 18, pages 173-181, Editura Lumen.
    • Handle: RePEc:lum:prchap:11-18
    DOI: https://doi.org/10.18662/lumproc/gekos2020/18
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    References listed on IDEAS

    as
    1. Laszlo Goerke, 2008. "Bureaucratic corruption and profit tax evasion," Economics of Governance, Springer, vol. 9(2), pages 177-196, May.
    2. Alm, James & Martinez-Vazquez, Jorge & McClellan, Chandler, 2016. "Corruption and firm tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 124(C), pages 146-163.
    3. Oliver Reimers, 2015. "Tax Evasion and the Shadow Economy," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(04), pages 61-62, January.
    4. Axel Dreher & Friedrich Schneider, 2010. "Corruption and the shadow economy: an empirical analysis," Public Choice, Springer, vol. 144(1), pages 215-238, July.
    5. Ronald D. Picur & Ahmed Riahi-Belkaoui, 2006. "The impact of bureaucracy, corruption and tax compliance," Review of Accounting and Finance, Emerald Group Publishing, vol. 5(2), pages 174-180, May.
    6. Schneider,Friedrich & Enste,Dominik H., 2016. "The Shadow Economy," Cambridge Books, Cambridge University Press, number 9781316600894.
    7. Friedrich SCHNEIDER, 2016. "Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions," Turkish Economic Review, KSP Journals, vol. 3(2), pages 256-280, June.
    8. Oliver Reimers, 2015. "Tax Evasion and the Shadow Economy," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(4), pages 61-62, 01.
    9. James Alm, 2012. "Measuring, explaining, and controlling tax evasion: lessons from theory, experiments, and field studies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 54-77, February.
    10. James Alm & Yongzheng Liu & Kewei Zhang, 2019. "Financial constraints and firm tax evasion," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 71-102, February.
    11. Cristina TIMOFTE (COCA) & Marian SOCOLIUC & Veronica GROSU, 2019. "Measuring Tax Evasion. Conceptual Approaches," The USV Annals of Economics and Public Administration, Stefan cel Mare University of Suceava, Romania, Faculty of Economics and Public Administration, vol. 19(1(29)), pages 116-121, June.
    12. Rajeev K. Goel & James W. Saunoris, 2019. "Does variability in crimes affect other crimes? The case of international corruption and shadow economy," Applied Economics, Taylor & Francis Journals, vol. 51(3), pages 239-258, January.
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    More about this item

    Keywords

    Corruption; European Union; Tax Evasion; VAT gap;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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