Relative trust and tax morale

Abstract

This paper investigates the importance of trust in international institutions for the development of tax morale by focussing on interactions between trust in the national government and trust in the European Union (EU) or trust in the United Nations (UN). Using large-scale survey data from European countries, we provide evidence that all three trust variables are significantly related to the individual level of tax morale. Overall, the results regarding trust in the EU and the UN are very similar, while trust in the national government appears to be the main factor in driving tax morale. However, depending on the national context, trust in the national government interacts differently with trust in different international institutions with respect to the shaping of tax morale.

Keywords:

• Trust
• tax morale
• international organisations
• European Union
• United Nations

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Acknowledgements

We are thankful to James Alm, Yongzheng Liu, Riyana Miranti, the anonymous referee, Jochen Hundsdoerfer, and the participants of the international workshop on ‘Economic and Behavioural Aspects of Tax Compliance’ for helpful comments and advice. All remaining deficiencies are our own. Charlotte Schmidt gratefully acknowledges personal funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) [Projekt-ID 440793159].

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 One exemption is Torgler (2012) who employs trust in the EU as a control variable in his analysis of tax morale in selected Eastern European countries. His results show a marginally significant association.

2 Please see https://europeanvaluesstudy.eu/methodology-data-documentation/integrated-values-surveys-ivs-1981-2021/ for details.

3 Over the full survey period, only five country-years had to be excluded due to the restriction to the UN-membership. The five country-years are: Montenegro (1996 and 2001), Serbia (1996), and Switzerland (1989 and 1996).

4 We separate regions at the NUTS1-level. For more information on the region classification, please refer to https://ec.europa.eu/eurostat/web/nuts/background.

5 The identification of high trust countries is based on all available information regarding trust in government within UN-member states in Europe, and the median of the average country levels of trust is determined by treating each country-wave-average as a single observation.

6 Non-linear models, such as an ordered probit model, lead to comparable results. We provide a robustness check of the first set of results (Table 2) in Table S7 in Section 5 of supplemental material. In general, it is unclear why the choice of a cardinality or ordinality assumption should matter in that context (for a discussion focussing on subjective well-being, see Ferrer‐i‐Carbonell and Frijters 2004).

7 For a recent literature overview on tax morale and demographic characteristics, see Horodnic (2018).

8 Weighting adjusts for the country’s average level of trust for sample representativeness regarding age, sex, education, and region.

9 Again, results regarding trust in the EU and trust in the UN are very similar.

10 Macroeconomic controls are obtained from the International Country Risk Guide (https://www.prsgroup.com/explore-our-products/icrg/) or the Worldwide Governance Indicators dataset provided by the World Bank (http://info.worldbank.org/governance/wgi/).