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What Shapes Attitudes Toward paying Taxes? Evidence from Multikultural European Countries Benno Torgler. By Malahayati Sari 0806435532. Outline. Objective Culture and Institution Political Attitudes and Religiosity Empirical Model Empirical Result Conclusion. Objective.
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What Shapes Attitudes Toward paying Taxes?Evidence from Multikultural European CountriesBenno Torgler By Malahayati Sari 0806435532
Outline • Objective • Culture and Institution • Political Attitudes and Religiosity • Empirical Model • Empirical Result • Conclusion
Objective • Citizen’s attitudes toward paying taxes defined as tax morale helps to explain the high degree of tax compliance • Paper is unique in its examination of citizen tax morale within three multicultural European countries, Switzerland, Belgium, and Spain • Switzerland : a land with strong democratic right and German, French, Italian –speaking individual • Belgium : a country with two main linguistic region • Spain : a nation of region with strong ethnic identities
Cont’d • Allingham & Sandmo (1972) : assume the extent of tax evasion to be negatively correlated with the probability of detection and degree of punishment • Alm (1999) & Torgler (2002) : The deterrence models predict far too little compliance and far too much tax evasion. • Frey & Feld (2002), Graetz & Wilde(1985) : a large gap exist between the effectively reported degree of risk aversion and the amount required to guarantee compliance and tax morale as a black box • Torgler (2003a) : tax morale significantly reduced tax evasion • The measure of tax morale is not individual behavior but individual attitude • Compliance behavior across culture are driven by difference s in tax administration and citizen attitude towards goverment • By examining tax morale in three multicultural European countries, the analysis focuses rather on cultural and institutional differences within countries
Culture and Institutions • Culture can be viewed “as a tool kit” of symbol, stories, ritual which people may use in varying configurations to solve different kind of problem • The institutional analysis has provided interesting insights in to the role of culture in the emergence and perpetuation of institutional and organizational trajectories • Societies are so intolerant or distrustful that their goverment simply cannot function effectively
Cont’d • Compliance rate vary between states : Spain and U. S, Switzerland and Costa Rica • Research by survey data make vary result • Focusing on cultural and institutional differences within (rather than between) should better isolate the impact of such determinants on tax morale • In other words, the more involved citizens are in establishing the rules, the stronger their sense of obligation
Political Attitude and Religiosity • Because this two variable can also affect tax morale, this study includes as variable trust in state institution, national pride, and pro democratic attitude • And religion can be seen as a proxy for such characteristic as work ethic, tolerance and trust, it act as supernatural police that enforce accepted rules • Religiosity proxied by frequency of church attendance
Empirical Model • Data from World Values Survey (1990-1993 & 1995-1999) and the European Values Survey (1999-2000) • Besides integrating personality and demographic factor in to a multiple regression analysis, they measure individual attitudes toward tax paying by asking whether cheating if the chance arise is always justified, never justified, or something in between • Model : TM = β0 + β1.CULTi + β2.INSTi + β3.PATTi + β4.RELi + β5.Tsi + β6.DEMi + β7.ECON + εi
Cont’d • Added variabel audit probability, fine rate, individual tax rate in observation at Swiss • Variabel:CUL(Culture), INST(Institution),PATT(Political attitude), REL(Religiosity), TS(Tax system), DEM(Demographic factor, such gender), ECON (Economic Variabel) • Use Weighted ordered probit and weighted probit estimation • Shows only the marginal effect for the highest tax morale
Result Switzerland : table 1 • A higher degree of direct democracy leads to higher tax morale also higher trust and national pride • French speaker have a lower, Italian speaker a higher tax morale than German speaker • Culture plays a significant role in the determination of individual tax morale • Religiosity has a positive effect on tax morale • The deterrence factor, have marginal effect very low • Women, individual (between 50-64), married people, part time employee, retire individual and people who stay at home have significantly higher level of tax morale
Result Belgium : Tabel 2 • Indicate no statistically significant difference between cultural groups • Flemish population exhibits lower tax morale than French, national and pro democratic stronger among French speaker • National pride and trust have a positive impact on tax morale • Pro democratic attitudes also religiosity have a highly significant positive effect on tax morale • The tax rate has no significant impact on tax morale • The higher income tends to lead to lower tax morale • Women, the 50-64 group,married people report higher tax morale
Result Spain : Tabel 3 • The Wald test indicates that culture plays a significant role in the determination of individual tax morale • Navarre and the Baque country have lower tax morale • For Basque country there are tax morale increased significantly over time • The higher autonomy does not lead to significantly higher tax morale • Pride, trust , pro democratic have a significan positive impact on tax morale, but not in Religiosity • Women more compliance,widowed shows the highest tax morale, part time employee have lower tax morale
Conclusion • Trust in legal system, goverment, parliament,national pride, pro democratic attitude have positive effect on tax morale, this provided evidence that higher legitimacy for political institution leads to higher tax morale • Switzerland direct democracy has a strong impact on tax morale • Spain more autonomy does not necessary lead to more support for goverment taxation, possibly because separatist tendencies and unfinished fiscal decentralization process • In Switzerland and Belgium, religiosity have impact tu tax morale ,not in spain • This paper provides new insight in to the factor that shape the emergence and maintenance of citiens, willingness to cooperae with tax legislation