Tax evasion, social norms, and economic growth

Abstract

We propose a theoretical model to account for the negative relationship between tax evasion and economic development.More precisely, we integrate tax morale into a dynamic OLG model of tax evasion. Tax morale is modeled as a social norm for tax compliance. We show that accounting for such nonpecuniary costs of evasion may explain (a) why the share of evaded taxes over GDP decreases when countries grow and (b) that tax morale is positively correlated with the level of GDP per capita. Finally, a higher tax rate increases aggregate evasion and the number of evaders when taxpayers decisions are interdependent.

Cultural norms, the persistence of tax evasion, and economic growth

“…Furthermore, they do not account for the social and cultural aspects of tax compliance -in their model, all households will engage in tax evasion, as long as they find a corrupt public official who is willing to help them conceal their tax fraud. 10 In this respect, the analysis that is conceptually closer to mine is that of Bethencourt and Kunze (2013) since they also incorporate a dynamic cultural externality à la Gordon (1989) in an OLG framework. Nevertheless, the scope and the results of their analysis are quite different.…”

The importance of considering optimal government policy when social norms matter for the private provision of public goods

“…The models of Rege (), Nyborg et al (), and Lin and Yang () does not explain why there is a social norm to contribute but model its dynamics. The approaches of Bicchieri () and Young (), or Gordon () and Bethencourt and Kunze () on tax evasion, are similar. Others, within the immense literature on the evolutionary roots of human altruism and prosocial behavior, have tried to model the emergence of social norms as evolutionary stable, fitness‐enhancing strategies (e.g., Bicchieri, Duffy, & Tolle, ; Bowles & Gintis, ).…”

“…Similarly, in the related literature on tax evasion and social norms, launched by the seminal article of Gordon (), the articles that consider the dynamic of the norm (Besley, Jensen, & Persson, ; Bethencourt & Kunze, ; Dell'Anno, ) do not analyze optimal government policy (Bethencourt & Kunze, ).…”

Curbing Tax Evasion through Taxpayer Identification Number (TIN) in Niger State, Nigeria

“…The TIN strategy was adopted over other strategies because it was determined to have the greatest chance of success. This was because it made access to basic services by businesses completely dependent on the possession of TIN which allowed the government to know whether or not a business This study adopts a qualitative approach by interviewing tax officials to understand their perspective regarding the efficacy of TIN in combating tax evasion in the state; this approach makes this study different from typical tax evasion studies that rely on secondary data to determine the efficacy of tax evasion policies like TIN (e.g., Ahrens & Bothner, 2019;Bethencourt & Kunze, 2019;Casais et al, 2019;Agarwal et al, 2020;Bernasconi et al, 2020 .…”