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Progressive Taxation and Tax Morale

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  • Doerrenberg, Philipp

    ()
    (ZEW Mannheim)

  • Peichl, Andreas

    ()
    (ZEW Mannheim)

Abstract

As the link between tax compliance and tax morale is found to be robust, finding the determinants of tax morale can help to understand and fight tax evasion. In this paper we analyze the effect of progressive taxation on tax morale in a cross-country approach – which has not been investigated before. Our theoretical analysis leads to two testable predictions. First, an individual’s tax morale is higher, the more progressive the tax schedule is. Second, the impact of tax progressivity on tax morale is declining in income. In our empirical analysis, we make use of a unique dataset of tax progressivity measures and follow most of the tax morale literature by employing the World Values Survey to measure tax morale. Controlling for a wide range of variables, we confirm both hypotheses in our empirical analysis.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5378.

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Length: 31 pages
Date of creation: Dec 2010
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Handle: RePEc:iza:izadps:dp5378

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Keywords: taxation; progressivity; tax compliance; redistribution; tax morale;

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Citations

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Cited by:
  1. Philipp Doerrenberg & Denvil Duncan & Clemens Fuest & Andreas Peichl, 2012. "Nice guys finish last: are people with higher tax morale taxed more heavily?," Cologne Graduate School Working Paper Series, Cologne Graduate School in Management, Economics and Social Sciences 03-02, Cologne Graduate School in Management, Economics and Social Sciences.
  2. Bird, Richard M. & Zolt, Eric M., 2011. "Dual Income Taxation: A Promising Path to Tax Reform for Developing Countries," World Development, Elsevier, Elsevier, vol. 39(10), pages 1691-1703.
  3. Etienne Lehmann & Claudio Lucifora & Simone Moriconi & Bruno Van Der Linden, 2013. "Beyond the Labour Income Tax Wedge: The Unemployment-Reducing Effect of Tax Progressivity," TEPP Working Paper, TEPP 2013-05, TEPP.
  4. Doerrenberg, Philipp & Duncan, Denvil, 2012. "Experimental Evidence on the Relationship between Tax Evasion Opportunities and Labor Supply," IZA Discussion Papers 6914, Institute for the Study of Labor (IZA).
  5. Doerrenberg, Philipp & Duncan, Denvil, 2014. "Tax Incidence in the Presence of Tax Evasion," IZA Discussion Papers 8137, Institute for the Study of Labor (IZA).
  6. Möhlmann, Axel, 2013. "Persistence or Convergence? The East-West Tax Morale Gap in Germany," MPRA Paper 50766, University Library of Munich, Germany, revised 27 Jul 2013.
  7. Kountouris, Yiannis & Remoundou, Kyriaki, 2013. "Is there a cultural component in tax morale? Evidence from immigrants in Europe," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 96(C), pages 104-119.
  8. Akay, Alpaslan & Bargain, Olivier & Dolls, Mathias & Neumann, Dirk & Peichl, Andreas & Siegloch, Sebastian, 2012. "Happy Taxpayers? Income Taxation and Well-Being," IZA Discussion Papers 6999, Institute for the Study of Labor (IZA).
  9. Andras Simonovits, 2011. "Higher tax morale implies a higher optimal income tax rate," IEHAS Discussion Papers, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 1137, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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