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Tax Evasion and the Importance of Trust

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Author Info

  • Hammar, Henrik

    (Department of Economics, Göteborg University and National Institute of Economic Research (NIER))

  • Jagers, Sverker

    ()
    (Department of Political Science, Göteborg University)

  • Nordblom, Katarina

    ()
    (Department of Economics, School of Business, Economics and Law)

Abstract

Unless people pay the taxes they are obliged to pay, a general welfare state will eventually collapse. Thus, for the welfare state to survive in the long run, tax compliance is of utmost importance. Using Swedish individual survey data we analyze which factors affect the perception of tax evasion. The analysis is conducted on ten different taxes and the results differ widely. Hence, we show that it is important to study different taxes separately rather than treating tax evasion as one common phenomenon. In this paper we focus on the importance of different kinds of trust. Whether or not people in general are regarded as trustworthy only has a minor impact on perceived tax evasion. Instead, what matters is trust or distrust in politicians. People who distrust the parliament are more likely than others to think that tax evasion is common, and the result holds for most of the taxes studied. This may have severe long-run consequences for the welfare state. If people stop trusting their leading politicians, social norms about tax compliance deteriorate and the possibilities of collecting taxes for maintain- ing the welfare state are reduced.

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File URL: http://hdl.handle.net/2077/2742
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 179.

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Length: 21 pages
Date of creation: 27 Sep 2005
Date of revision:
Publication status: Published in Journal of Socio-Economics, 2009, pages 238-245.
Handle: RePEc:hhs:gunwpe:0179

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: trust in politicians; generalized trust; social capital; general welfare state; tax policy; tax compliance;

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References

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  1. Gordon, James P. P., 1989. "Individual morality and reputation costs as deterrents to tax evasion," European Economic Review, Elsevier, vol. 33(4), pages 797-805, April.
  2. Benno Torgler, 2004. "Tax Morale, Trust and Corruption: Empirical Evidence from Transition Countries," CREMA Working Paper Series 2004-05, Center for Research in Economics, Management and the Arts (CREMA).
  3. Benno Torgler, 2003. "Tax Morale, Rule-Governed Behaviour and Trust," Constitutional Political Economy, Springer, vol. 14(2), pages 119-140, June.
  4. Joel Slemrod & Shlomo Yitzhaki, 2000. "Tax Avoidance, Evasion, and Administration," NBER Working Papers 7473, National Bureau of Economic Research, Inc.
  5. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
  6. Bordignon, Massimo, 1993. "A fairness approach to income tax evasion," Journal of Public Economics, Elsevier, vol. 52(3), pages 345-362, October.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Distrusting distrust
    by chris dillow in Stumbling and Mumbling on 2012-09-20 09:21:29
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Cited by:
  1. Nordblom, Katarina & Ohlsson, Henry, 2005. "Tax Avoidance and Intra-Family Transfers," Working Paper Series 2005:6, Uppsala University, Department of Economics.
  2. Felix Ebeling & Christoph Feldhaus & Johannes Fendrich, 2012. "Follow the Leader or Follow Anyone - Evidence from a Natural Field Experiment," Cologne Graduate School Working Paper Series 03-04, Cologne Graduate School in Management, Economics and Social Sciences, revised 20 Jan 2013.
  3. Traxler, Christian, 2010. "Social norms and conditional cooperative taxpayers," European Journal of Political Economy, Elsevier, vol. 26(1), pages 89-103, March.

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