Tax Evasion and the Importance of Trust
Unless people pay the taxes they are obliged to pay, a general welfare state will eventually collapse. Thus, for the welfare state to survive in the long run, tax compliance is of utmost importance. Using Swedish individual survey data we analyze which factors affect the perception of tax evasion. The analysis is conducted on ten different taxes and the results differ widely. Hence, we show that it is important to study different taxes separately rather than treating tax evasion as one common phenomenon. In this paper we focus on the importance of different kinds of trust. Whether or not people in general are regarded as trustworthy only has a minor impact on perceived tax evasion. Instead, what matters is trust or distrust in politicians. People who distrust the parliament are more likely than others to think that tax evasion is common, and the result holds for most of the taxes studied. This may have severe long-run consequences for the welfare state. If people stop trusting their leading politicians, social norms about tax compliance deteriorate and the possibilities of collecting taxes for maintain- ing the welfare state are reduced.
|Date of creation:||27 Sep 2005|
|Date of revision:|
|Publication status:||Published in Journal of Socio-Economics, 2009, pages 238-245.|
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- Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
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NBER Working Papers
7473, National Bureau of Economic Research, Inc.
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- Benno Torgler, 2003. "Tax Morale, Rule-Governed Behaviour and Trust," Constitutional Political Economy, Springer, vol. 14(2), pages 119-140, June.
- Bordignon, Massimo, 1993. "A fairness approach to income tax evasion," Journal of Public Economics, Elsevier, vol. 52(3), pages 345-362, October.
- Benno Torgler, 2004. "Tax Morale, Trust and Corruption: Empirical Evidence from Transition Countries," CREMA Working Paper Series 2004-05, Center for Research in Economics, Management and the Arts (CREMA).
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