Tax morale and prosocial behaviour: evidence from a Palestinian survey

The first empirical investigation is conducted into the relationship between prosocial behaviour and tax morale in the context of state capacity building as in the Palestinian Territories. We consider ‘public spirit’ (a positive attitude adopted by citizens for the benefit of the community) and associational activity (individuals’ engagement in voluntary activities) two major expressions of prosocial behaviour and estimate their impact on Palestinians’ ‘tax morale’ (intrinsic motivation to pay taxes). The empirical analysis employs a unique Palestinian public opinion survey conducted in 2007 in the West Bank and the Gaza Strip. By using a bivariate probit model, we find that tax morale increases with public spirit but it is lower among Palestinians involved in associational activities. Predicted conditional probabilities indicate that public spirit has more impact when the respondent has low confidence in the institutions and in the rule of law. Finally, more public spirit is required for a self-employed person in order to deal with tax compliance than for a worker in the public sector, unless the worker in the public sector has lower confidence in the institutions and in the rule of law than the self-employed person.