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Why People Evade Taxes in the Czech and Slovak Republics: A Tale of Twins

Author

Listed:
  • Jan Hanousek

    (Center for Economic Research and Graduate Education-Economics Institute)

  • Filip Palda

    (École nationale d'administration publique)

Abstract

The present paper uses a survey of 1062 Czechs and 524 Slovaks to ask why people evade taxes. We maintain that the Czech and Slovak Republics are “twins” separated at birth and that divergences between these countries since their separation in 1992 can explain divergences in their rates of tax evasion. High Slovak tax rates and lower Czech tax rates seem to explain little of the difference in evasion between the two countries. Rising Czech incomes seems the main reason that Czech Republic evades more taxes. We also look at detailed demographic and psychological reasons for tax evasion. We find that morality is a strong deterrent to evasion.

Suggested Citation

  • Jan Hanousek & Filip Palda, 2002. "Why People Evade Taxes in the Czech and Slovak Republics: A Tale of Twins," Public Economics 0205003, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0205003
    Note: Type of Document - pdf; prepared on IBM-PC; to print on Any;
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/pe/papers/0205/0205003.pdf
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    References listed on IDEAS

    as
    1. Lizal, Lubomir & Kocenda, Evzen, 2001. "State of corruption in transition: case of the Czech Republic," Emerging Markets Review, Elsevier, vol. 2(2), pages 138-160, June.
    2. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
    3. 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 363-373, August.
    4. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
    5. Peter Sørensen, 1994. "From the global income tax to the dual income tax: Recent tax reforms in the Nordic countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(1), pages 57-79, February.
    6. Baldry, Jonathan C, 1987. "Income Tax Evasion and the Tax Schedule: Some Experimental Results," Public Finance = Finances publiques, , vol. 42(3), pages 357-383.
    7. 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.
    8. Scotchmer, Suzanne, 1989. "Who profits from taxpayer confusion?," Economics Letters, Elsevier, vol. 29(1), pages 49-55.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. repec:mup:actaun:actaun_2014062061427 is not listed on IDEAS
    2. Juan Molero & Francesc Pujol, 2012. "Walking Inside the Potential Tax Evader’s Mind: Tax Morale Does Matter," Journal of Business Ethics, Springer, vol. 105(2), pages 151-162, January.
    3. Jan Hanousek & Filip Palda, 2002. "The Evolution of Tax Evasion in the Czech Republic: A Markov Chain Analysis," Public Economics 0205002, University Library of Munich, Germany.
    4. Klarita Gërxhani, 2007. "Explaining gender differences in tax evasion: the case of Tirana, Albania," Feminist Economics, Taylor & Francis Journals, vol. 13(2), pages 119-155.
    5. Ялъмов, Тодор, 2003. "Неотчетената Икономическа Активност В Информационния Сектор В България: Проблеми, Въпроси И Оценки
      [Unrecorded economic activity in information sector in Bulgaria: problems, issues and assessments]
      ," MPRA Paper 62232, University Library of Munich, Germany.
    6. Juan Carlos Molero & Francesc Pujol, 2005. "Walking inside the Potential Tax Evader's Mind," Faculty Working Papers 01/05, School of Economics and Business Administration, University of Navarra.
    7. repec:aia:aiaswp:wp32 is not listed on IDEAS
    8. Katarina Svitkova, 2006. "Corporate Philanthropy in the Czech and Slovak Republics," CERGE-EI Working Papers wp312, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. repec:kap:pubcho:v:174:y:2018:i:3:d:10.1007_s11127-018-0504-x is not listed on IDEAS

    More about this item

    Keywords

    Tax evasion; transition economies; Czech Republic; Slovak Republic;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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