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Determinants of Tax Morale in Croatia: an Ordered Logit Model

Author

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  • Bejaković Predrag

    (Institute of Public Finance, Zagreb, Croatia)

  • Bezeredi Slavko

    (Institute of Public Finance, Zagreb, Croatia)

Abstract

Background: A lower tax morality leads to an increased readiness to become active in the unofficial economy and causes the lack of public revenues.Objectives: The aim of this paper is to investigate determinants that shape tax morale of Croatian citizens.Methods/Approach: An ordered logit model is employed to evaluate which determinants shape tax morale of Croatian citizens. Data for the research were collected from 2,000 face-to-face interviews conducted in Croatia in late 2015.Results: The descriptive analysis illustrates that 52 percent of respondents reported a high level of tax morale, 26 percent of respondents have a low tax morale, while 8 and 14 percent have a mid-low and a mid-high tax morale, respectively. The ordered logit analysis revealed that gender, age, financial situation, region, and participation in the unofficial economy have an impact on the tax morale.Conclusions: Besides socio-demographic, socio-economic, and spatial determinants, a great number of sanctions for participation in informal activities also shapes tax morale of the Croatian citizens. More precisely, marginal effects show that those perceiving the expected sanctions as “normal tax or social security contributions due, plus a fine or a prison sentence” have by 6.3 percentage points higher probability of reporting the highest tax morale than others.

Suggested Citation

  • Bejaković Predrag & Bezeredi Slavko, 2019. "Determinants of Tax Morale in Croatia: an Ordered Logit Model," Business Systems Research, Sciendo, vol. 10(2), pages 37-48, September.
    • Handle: RePEc:bit:bsrysr:v:10:y:2019:i:2:p:37-48:n:3
    DOI: 10.2478/bsrj-2019-016
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    1. Carvalho Junior, P.H.B. & De Cesare, C., 2022. "Who pays the property tax? Evidence from Brazil," Land Use Policy, Elsevier, vol. 120(C).

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    More about this item

    Keywords

    Croatia; ordered logit model; tax evasion; tax morale;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • 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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