The impact of tax morale and institutional quality on the shadow economy

Torgler, Benno; Schneider, Friedrich

doi:10.1016/j.joep.2008.08.004

Cited by 527 publications

(465 citation statements)

References 44 publications

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“…2 In a cross-country analysis find statistically significant evidence that higher tax morale leads to smaller shadow economies. Results pointing in the same direction have also been found in many other empirical analyses (see, among others, Torgler 2005, , Dell'Anno 2009and Torgler and Schneider 2009. Based on his empirical findings, Halla (2010) concludes that 1) economic scholars need to be 1 Refer to Andreoni et al (1998) for a comprehensive overview on tax evasion literature.…”

Section: Introductionsupporting

confidence: 56%

Progressive taxation and tax morale

2011

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 5378 December 2010 ABSTRACT Progressive Taxation and Tax Morale *As the link between tax compliance and tax morale is found to be robust, finding the determinants of tax morale can help to understand and fight tax evasion. In this paper we analyze the effect of progressive taxation on tax morale in a cross-country approach -which has not been investigated before. Our theoretical analysis leads to two testable predictions. First, an individual's tax morale is higher, the more progressive the tax schedule is. Second, the impact of tax progressivity on tax morale is declining in income. In our empirical analysis, we make use of a unique dataset of tax progressivity measures and follow most of the tax morale literature by employing the World Values Survey to measure tax morale. Controlling for a wide range of variables, we confirm both hypotheses in our empirical analysis.JEL Classification: H26, H24, D7, D31

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Section: Introductionsupporting

confidence: 56%

Progressive taxation and tax morale

2011

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“…Feld and Frey (2007), Kirchler (2007), Torgler and Schneider (2009), Feld and Larsen (2005, 2009), Feld and Schneider (2010) (6) Deterrence Despite the strong focus on deterrence in policies fighting the shadow economy and the unambiguous insights of the traditional economic theory of tax non-compliance, surprisingly little is known from empirical studies about the effects of deterrence. This is because data on the legal background and the frequency of audits are not available on an international basis; even for OECD countries such data are difficult to collect.…”

Section: Theorizing About the Shadow Economymentioning

confidence: 99%

Shadow Economy: Estimation Methods, Problems, Results and Open questions

Schneider

Buehn²

2018

Open Economics

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151

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This paper presents various methods used for estimating the size of the shadow economy. Each method is evaluated and its strengths and weaknesses are discussed, as well as results each method yields. The purpose of the paper is threefold: Firstly, to demonstrate that there is no single infallible method for estimating the size and development of the shadow economy and results can differ significantly between different approaches. The MIMIC approach, discussed in greater detail, is often used due to its flexibility. Secondly, the paper discusses the very definition of the shadow economy and factors contributing to its growth. Finally, latest estimations of the size of the shadow economies of 143 countries over the period 1996 to 2014 are presented. JEL-Classification: D78, E26, H2, H11, H26, K42, O5, O17Keywords: shadow economy estimates, MIMIC approach, methods to estimate the shadow economy, advantages and disadvantages of the methods, MIMIC-method, calibration procedure, light intensity approach IntroductionEmpirical research about the size and development of the shadow economy all over the world has grown rapidly. Nowadays, there are so many studies,1 which use different methods in order to estimate the size and development of the shadow economy, that it is quite difficult to judge the reliability of various methods. Hence, the goal of this paper is to critically review the various methods for estimating the size of the shadow economy and to discuss their strengths and weaknesses. This will enable an interested reader to evaluate the advantages and disadvantages of the different methods.The paper is structured as follows: In the next section some theoretical considerations are presented, starting with a definition of the shadow economy and a brief discussion of its main causes. In section 3 the various measurement methods, as well as their strengths and weaknesses, are described. This section also presents estimates of the size of the shadow economy in Germany using different estimation methods. Section 4 presents some latest developments, new measurement methods, the concept of digital shadow economy, and latest results from 143 countries between 1996 and 2014. Finally, section 5 presents a summary and some concluding remarks.1 See e.g. Feld and Schneider (2010), Gerxhani (2003), Schneider (2015), and Schneider and Williams (2013), Schneider (2016, Schneider (2016), andSauka, Schneider and Defining the shadow economyResearchers attempting to measure the size of shadow economy face the first and difficult question of how to define it.2 One commonly used working definition encompasses all currently unregistered economic activities that would contribute to the officially calculated (or observed) Gross National Product if observed.3 Smith (1994, p. 18) uses the definition "market-based production of goods and services, whether legal or illegal, that escapes detection in the official estimates of GDP." One of the broadest definitions includes "those economic activities and the income derived from them ...

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“…In combination with reduced tax morale and weaker loyalty to the government, empirical evidence shows that these are the most important factors contributing to the migration of jobs into the shadow economy. Vital steps for reversing this growth of the shadow economy are improving institutions and respect for government by strengthening tax morale, voice and accountability, rule of law, governance, regulatory quality, and by reducing corruption [11].…”

Section: Summary and Policy Advice The Shadow Economy-a Challenge Formentioning

confidence: 99%