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State Capacity and Tolerance towards Tax Evasion: First Evidence from Romania

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  • Călin Vâlsan

    () (Williams School of Business, Bishops’ University, Sherbrooke, QC J1M1Z7, Canada)

  • Elena Druică

    () (Faculty of Business and Administration, University of Bucharest, 030018 Bucharest, Romania)

  • Rodica Ianole-Călin

    () (Faculty of Business and Administration, University of Bucharest, 030018 Bucharest, Romania)

Abstract

We investigate the level of tolerance towards tax non-compliance and the informal economy in Romania, using a sample of 250 respondents. This variable is determined by a complex set of latent variables that include, but is not limited to, state capacity, social and business norms, the perception of non-compliance, and the perception of distributive justice. We find that our respondents are intolerant towards tax evasion and the informal economy, but the level of intolerance is relatively mild. Using a partial least squares—path modeling approach, we also find that a weak state capacity and the perception of lack of distributive justice increases the level of tolerance. The perception of tax evasion stemming from media reports, and the respondents’ own self-enhancement bias, combine to push the level of tolerance lower.

Suggested Citation

  • Călin Vâlsan & Elena Druică & Rodica Ianole-Călin, 2020. "State Capacity and Tolerance towards Tax Evasion: First Evidence from Romania," Administrative Sciences, MDPI, Open Access Journal, vol. 10(2), pages 1-17, June.
  • Handle: RePEc:gam:jadmsc:v:10:y:2020:i:2:p:33-:d:370826
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    References listed on IDEAS

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    1. Cullis, John G. & Lewis, Alan, 1997. "Why people pay taxes: From a conventional economic model to a model of social convention," Journal of Economic Psychology, Elsevier, vol. 18(2-3), pages 305-321, April.
    2. Keith Walsh, 2012. "Understanding Taxpayer Behaviour – New Opportunities for Tax Administration," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 451-475.
    3. Benno Torgler & Friedrich Schneider, 2007. "What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries," Social Science Quarterly, Southwestern Social Science Association, vol. 88(2), pages 443-470, June.
    4. Benno Torgler, 2003. "Tax Morale in Transition Countries," Post-Communist Economies, Taylor & Francis Journals, vol. 15(3), pages 357-381.
    5. Torgler, Benno, 2011. "Tax morale, eastern Europe and European enlargement," Policy Research Working Paper Series 5911, The World Bank.
    6. Rogers, Melissa Ziegler & Weller, Nicholas, 2014. "Income taxation and the validity of state capacity indicators," Journal of Public Policy, Cambridge University Press, vol. 34(2), pages 183-206, August.
    7. Wenzel, Michael, 2004. "An analysis of norm processes in tax compliance," Journal of Economic Psychology, Elsevier, vol. 25(2), pages 213-228, April.
    8. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    9. Wenzel, Michael, 2005. "Motivation or rationalisation? Causal relations between ethics, norms and tax compliance," Journal of Economic Psychology, Elsevier, vol. 26(4), pages 491-508, August.
    10. Richardson, Grant, 2008. "The relationship between culture and tax evasion across countries: Additional evidence and extensions," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 17(2), pages 67-78.
    11. Torgler, Benno, 2005. "Tax morale and direct democracy," European Journal of Political Economy, Elsevier, vol. 21(2), pages 525-531, June.
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    More about this item

    Keywords

    tax compliance; informal economy; state capacity; partial least square model;

    JEL classification:

    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • L - Industrial Organization

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