IDEAS home Printed from https://ideas.repec.org/p/ude/wpaper/1015.html
   My bibliography  Save this paper

Tolerance to Tax Evasion

Author

Listed:
  • Alvaro Forteza

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Cecilia Noboa

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

We present a formal model in which individuals want the government to tolerate tax evasion because, in the context of limited state capacity, evasion provides insurance. Preferred tolerance to tax evasion increases with income, because government programs are redistributive. We take the model to the data using the World Values Survey. We show that both in the model and in the WVS data justification of tax evasion is increasing in individuals’ income, presents an inverted-U shape in perceived risk and is decreasing in institutional quality. Our analysis suggests that strong tax enforcement might not be popular among many citizens, particularly so in weak institutional environments.

Suggested Citation

  • Alvaro Forteza & Cecilia Noboa, 2015. "Tolerance to Tax Evasion," Documentos de Trabajo (working papers) 1015, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:1015
    as

    Download full text from publisher

    File URL: https://hdl.handle.net/20.500.12008/10722
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bigio, Saki & Zilberman, Eduardo, 2011. "Optimal self-employment income tax enforcement," Journal of Public Economics, Elsevier, vol. 95(9), pages 1021-1035.
    2. Frey, Bruno S. & Torgler, Benno, 2007. "Tax morale and conditional cooperation," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 136-159, March.
    3. Alvaro Forteza & Graciela Sanroman, 2015. "Social Security and Retirement in Uruguay," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 386-406, April.
    4. Philipp Doerrenberg & Andreas Peichl, 2013. "Progressive taxation and tax morale," Public Choice, Springer, vol. 155(3), pages 293-316, June.
    5. Benno Torgler & Christoph A. Schaltegger, 2005. "Tax Morale and Fiscal Policy," CREMA Working Paper Series 2005-30, Center for Research in Economics, Management and the Arts (CREMA).
    6. Alesina, Alberto & Angeletos, George-Marios, 2005. "Corruption, inequality, and fairness," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1227-1244, October.
    7. Cruces, Guillermo & Perez-Truglia, Ricardo & Tetaz, Martin, 2013. "Biased perceptions of income distribution and preferences for redistribution: Evidence from a survey experiment," Journal of Public Economics, Elsevier, vol. 98(C), pages 100-112.
    8. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 551-584.
    9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    10. Sophia Rabe-Hesketh & Anders Skrondal, 2012. "Multilevel and Longitudinal Modeling Using Stata, 3rd Edition," Stata Press books, StataCorp LP, edition 3, number mimus2, March.
    11. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the United States Have a European-Style Welfare State?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 187-278.
    12. Halla Martin, 2012. "Tax Morale and Compliance Behavior: First Evidence on a Causal Link," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-27, April.
    13. Christian Daude & Hamlet Gutiérrez & Ángel Melguizo, 2012. "What Drives Tax Morale?," OECD Development Centre Working Papers 315, OECD Publishing.
    14. Alberto Alesina & Nicola Fuchs-Schündeln, 2007. "Goodbye Lenin (or Not?): The Effect of Communism on People," American Economic Review, American Economic Association, vol. 97(4), pages 1507-1528, September.
    15. Alm, James & Torgler, Benno, 2006. "Culture differences and tax morale in the United States and in Europe," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 224-246, April.
    16. Erzo F. P. Luttmer & Monica Singhal, 2014. "Tax Morale," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 149-168, Fall.
    17. Torgler, Benno, 2006. "The importance of faith: Tax morale and religiosity," Journal of Economic Behavior & Organization, Elsevier, vol. 61(1), pages 81-109, September.
    18. Alvaro Forteza & Cecilia Noboa, 2014. "Discretion Rather than Simple Rules: the Case of Social Protection," Documentos de Trabajo (working papers) 0814, Department of Economics - dECON.
    19. Mariana Gerstenbluth & Natalia Melgar & Juan Pablo Pagano & Maximo Rossi, 2012. "How do inequality affect tax morale in Latin America and Caribbean?," Revista de Economía del Rosario, Universidad del Rosario, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alvaro Forteza & Cecilia Noboa, 2019. "Perceptions of institutional quality and justification of tax evasion," Constitutional Political Economy, Springer, vol. 30(4), pages 367-382, December.
    2. Philipp Doerrenberg & Andreas Peichl, 2022. "Tax Morale and the Role of Social Norms and Reciprocity - Evidence from a Randomized Survey Experiment," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 78(1-2), pages 44-86.
    3. Belmonte, Alessandro & Dell'Anno, Roberto & Teobaldelli, Désirée, 2018. "Tax morale, aversion to ethnic diversity, and decentralization," European Journal of Political Economy, Elsevier, vol. 55(C), pages 204-223.
    4. Alvaro Forteza & Cecilia Noboa, 2021. "Tolerance of tax evasion," International Economics and Economic Policy, Springer, vol. 18(4), pages 767-786, October.
    5. Emmanuelle Deglaire & Peter Daly & Fabrice Lec, 2021. "Exposure to tax dilemmas deteriorate individuals' self-declared tax morale," Economics of Governance, Springer, vol. 22(4), pages 363-397, December.
    6. Philipp Doerrenberg & Denvil Duncan & Clemens Fuest & Andreas Peichl, 2014. "Nice Guys Finish Last: Do Honest Taxpayers Face Higher Tax Rates?," Kyklos, Wiley Blackwell, vol. 67(1), pages 29-53, February.
    7. Gloria Alarcón García & José Daniel Buendía Azorín & María del Mar Sánchez Vega, 2016. "El rechazo al fraude fiscal en España: antes y después de la Gran crisis," Hacienda Pública Española / Review of Public Economics, IEF, vol. 218(3), pages 33-56, September.
    8. Doerrenberg, Philipp & Duncan, Denvil & Fuest, Clemens & Peichl, Andreas, 2012. "Nice Guys Finish Last: Are People with Higher Tax Morale Taxed More Heavily?," IZA Discussion Papers 6275, Institute of Labor Economics (IZA).
    9. Blesse, Sebastian, 2021. "Are your tax problems an opportunity not to pay taxes? Evidence from a randomized survey experiment," ZEW Discussion Papers 21-040, ZEW - Leibniz Centre for European Economic Research.
    10. Colin C. Williams, 2014. "Confronting the Shadow Economy," Books, Edward Elgar Publishing, number 15370.
    11. Arun Advani, 2022. "Who does and doesn't pay taxes?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 5-22, March.
    12. David Rodriguez-Justicia & Bernd Theilen, 2023. "Ideological alignment, public sector size and tax morale: empirical evidence from OECD economies," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    13. Ilpo Kauppinen & Panu Poutvaara, 2019. "Preferences for Redistribution and International Migration," ifo Working Paper Series 283, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    14. Vladimir Gimpelson & Daniel Treisman, 2018. "Misperceiving inequality," Economics and Politics, Wiley Blackwell, vol. 30(1), pages 27-54, March.
    15. Kerr, William R., 2014. "Income inequality and social preferences for redistribution and compensation differentials," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 62-78.
    16. Axel Möhlmann, 2014. "Persistence or Convergence? The East-West Tax-Morale Gap in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 3-30, March.
    17. Philipp Doerrenberg & Andreas Peichl, 2013. "Progressive taxation and tax morale," Public Choice, Springer, vol. 155(3), pages 293-316, June.
    18. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    19. Pfarr Christian & Ulrich Volker, 2011. "Discrete-Choice-Experimente zur Ermittlung der Präferenzen für Umverteilung," Review of Economics, De Gruyter, vol. 62(3), pages 232-262, December.
    20. Londoño-Vélez, Juliana, 2022. "The impact of diversity on perceptions of income distribution and preferences for redistribution," Journal of Public Economics, Elsevier, vol. 214(C).

    More about this item

    Keywords

    Informality; tax morale; tolerance to evasion.;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ude:wpaper:1015. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Andrea Doneschi or the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/derauuy.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.