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Threats in Latin American and Caribbean countries: how do inequality and the asymmetries of rules affect tax morale?

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  • Mariana Gerstenblüth

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

  • Natalia Melgar

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

  • Juan Pablo Pagano

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

  • Máximo Rossi

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

Abstract

Latin America is well known as the most inequitable region. As it is recognized, inequality and corruption perception weaken the way that political institutions works and the democratic system. Focusing on Latin American and Caribbean countries, we analyze what are the elements that shape tax morale. In particular, we analyze how the context influences on ethic decisions such as the predisposition to pay taxes. Our data source is the survey carried out in 2005 by Latinobarometro. In particular, our objective is to analyze how country performance is determining tax morale. To do so, we estimated four probit models including Gini index, Transparency International Corruption Perception Index and Gross Domestic Product per capita (GDPpc). As expected we found that some socio-demographic variables play a relevant role. Interestingly, we also found that, in this attitude, LAC countries do not register a gender bias. However, those are not our main contributions to the literature on the field. The most important results are linked with: 1) the level matters, GDPpc increases the probability that people have tax morale, 2) moreover, income distribution also influence on tax morale but in opposite direction and 3) corruption perception also reduces tax morale. Those results show that the quality of institutions matters and therefore, the way that democracy works play a relevant role.

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Bibliographic Info

Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 1408.

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Length: 13 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:ude:wpaper:1408

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Keywords: tax morale; corruption; inequality; democracy; microeconomic behavior;

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  1. Inna Cabelkova, 2001. "Perceptions of Corruption in Ukraine: Are They Correct?," Public Economics 0110004, EconWPA.
  2. Jorge Martinz-Vazquez & Benno Torgler, 2005. "The Evolution of Tax Morale in Modern Spain," CREMA Working Paper Series 2005-33, Center for Research in Economics, Management and the Arts (CREMA).
  3. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
  4. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  5. Benno Torgler, 2003. "Tax Morale in Latin America," Working papers 2003/03, Faculty of Business and Economics - University of Basel.
  6. Inna Cabelkova, 2001. "Perceptions of Corruption in Ukraine: Are They Correct?," CERGE-EI Working Papers wp176, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  7. Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2002. "Joint tax evasion," Canadian Journal of Economics, Canadian Economics Association, vol. 35(3), pages 417-435, August.
  8. Lars P. Feld & Bruno S. Frey, . "Trust Breeds Trust: How Taxpayers are Treated," IEW - Working Papers 098, Institute for Empirical Research in Economics - University of Zurich.
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