Paying Taxes Like Uli Hoeneß -- Tax Evasion, Charitable Giving, and Political Congruence

We study the joint determination of tax evasion and charitable giving. A simple model in which individuals derive a warm glow from contributing to socially valuable activities predicts that congruence with the government determines whether tax payments substitute for private donations: under congruence, taxes and donations are warm-glow substitutes and donating-while-evading is dominated; under incongruence, donations retain their warm glow value while taxes do not, opening a region in the preference space in which evasion and donation are jointly optimal. We test the prediction using the seventh wave of the World Values Survey. Consistent with the theory, individuals with low levels of obedience and high prosocial motives are most likely to be observed in the donate-and-evade cell, and this concentration is stronger when individuals are not aligned with their national government---raising their odds of donating while evading by roughly one-quarter. Our results point to political congruence as a margin of tax compliance largely absent from the standard tax-compliance-and-morale literature, yet with implications for institutional design.