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Tax compliance in post-transition: You and your friends matter, not the government

Author

Listed:
  • Natalia Levenko
  • Karsten Staehr

Abstract

This paper contributes to the literature that seeks to assess the importance of various theories on tax evasion by individuals. The various theories can be distinguished in detail using a very fine-grained survey of Estonian residents that was collected in three rounds from 2018 to 2020. Principal component analysis shows that the survey replies are mutually consistent and form distinct clusters that match key theories on tax evasion. Logit estimations of tax compliance use the principal components and various control variables as covariates. Theories of individual rational choice do not gain support. Factors associated with personal norms and with social norms and customs are important for tax compliance. Importantly, theories of reciprocity that depict a positive relation between approval of the government and tax compliance receive no support, possibly reflecting the wide spread of views on the role of government in post-transition Estonia. Sample splits reveal that the results apply broadly across various subsets of taxpayers. The results of the principal component regressions are corroborated by logit estimations where the survey variables enter individually

Suggested Citation

  • Natalia Levenko & Karsten Staehr, 2021. "Tax compliance in post-transition: You and your friends matter, not the government," Bank of Estonia Working Papers wp2021-7, Bank of Estonia, revised 10 Nov 2021.
    • Handle: RePEc:eea:boewps:wp2021-7
    DOI: 10.23656/25045520/072021/0189
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    Cited by:

    1. A. E. Biondo & G. Burgio & A. Pluchino & D. Puglisi, 2022. "Taxation and evasion: a dynamic model," Journal of Evolutionary Economics, Springer, vol. 32(3), pages 797-826, July.
    2. Levenko, Natalia & Staehr, Karsten, 2023. "Self-reported tax compliance in post-transition Estonia," Economic Systems, Elsevier, vol. 47(3).

    More about this item

    Keywords

    tax evasion; monetary and non-monetary motives; auditing; behavioural choice; norms and customs; reciprocity;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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