Tax morale

March 5th, 2019 § 0 comments

Would you dodge taxes, if you were sure you could get away with it? Absolutely you would, according to standard economic theory:

In the benchmark economic model, the key policy parameters affecting tax evasion are the tax rate, the detection probability, and the penalty imposed conditional on the evasion being detected.

But that doesn’t match reality, argues this paper on so-called “tax morale”. All but the slimiest of us have some inclination to pay up. If we didn’t then tax revenues would be far, far lower than they currently are.

Some economists have attempted to measure this. One way is to look at what gets paid in the absence of enforcement. There is absolutely no enforcement of the church tax in Bavaria, but 20% of people pay anyway. Or you can assume that migrant entrepreneurs bring attitudes to tax with them. In the US, there’s an 8% gap in tax evasion between Nigerian-owned and Swedish-owned companies.

from the main blog – http://ohuiginn.net/wp/?p=2038

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