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ABSTRACT
Despite substantial repressive endeavours of the tax authorities, undeclared work still remains deeply ingrained in the Polish economy. To explore reasons for such a modest achievement in the fight against noncompliance, this paper scrutinises key factors shaping the decisions of taxpayers in this respect. Logistic regression analysis applied on data from the representative survey of 1,000 individuals conducted during 2013 found no association between the perceived deterrence and the behaviour of Polish citizens. On the other hand, tax morale appears to be the central factor underlying both demand for and supply of undeclared goods and services. Besides questioning the validity of the current policy approach to tackle undeclared work in Poland, the paper hence also calls to put more emphasis on measures improving the culture of voluntary compliance.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1. It should be mentioned that Schneider actually provides estimates for the shadow economy, which besides undeclared work also encompasses frauds related to business income (Schneider, Citation2013). The real extent of undeclared work is therefore somewhat lower than suggested by these figures.
2. This should be perceived only as a lower boundary since great many individuals either refused to answer this question or did not know the exact answer. It is thus more illustrative to say that only 90% of the survey participants categorically denied any involvement in this form of tax evasion.
3. It is actually the perception of citizens, rather than the real state of affairs that plays a crucial role in the case of tax burden. Although most studies place Poland somewhere in the middle of the EU list in this respect (European Commission, Citation2017c; Eurostat, Citation2019; Rogers & Philippe, Citation2018), Polish taxpayers are generally dissatisfied with the level of taxation. For instance, 61% of company owners and managers surveyed in 2017 as a part of the Flash Eurobarometer Survey 457 identified high taxes as a serious problem for their business operations (European Commission, Citation2017b).
4. One should, however, not forget that low tax morale in transition countries is to a large extent a cultural heritage from the socialist period (Torgler, Citation2003, Citation2011). This feature can be therefore scrutinised not only from the psychological angle but also from the sociological one.
5. For a detailed overview of the survey findings see European Commission (Citation2014).
6. Seven different types of misbehaviour were actually offered (see European Commission, Citation2014), but only these four are closely linked to the research problem discussed here. As a robustness check, a model with all seven variables included was also evaluated during the initial phase of research. Since no significant difference in the regression coefficients between these two models was found, the decision was made to proceed with the chosen four variables.
7. The resulting tax morale index is also given on an inverse scale, with larger values actually signifying lower readiness to pay taxes on a voluntary basis.
8. The procedure was based on the system of chained equations, which follows a Gibbs-like algorithm to impute multiple variables sequentially. All results presented in this paper were obtained using the statistical package STATA, with country post-stratification weights being applied in both descriptive statistics and regression analysis.