Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 179: Tax Evasion and the Importance of Trust
Henrik Hammar, Sverker Jagers () and Katarina Nordblom ()
Additional contact information
Henrik Hammar: Department of Economics, Göteborg University and National Institute of Economic Research (NIER), Postal: NIER, Box 3116 , SE 103 62 Stockholm
Sverker Jagers: Department of Political Science, Göteborg University, Postal: P.O. Box 711, SE 405 30 GÖTEBORG
Katarina Nordblom: Department of Economics, School of Business, Economics and Law, Postal: Göteborg University, Box 640, SE 405 30 GÖTEBORG
Abstract: Unless people pay the taxes they are obliged to pay, a general welfare state will eventually collapse. Thus, for the welfare state to survive in the long run, tax compliance is of utmost importance. Using Swedish individual survey data we analyze which factors affect the perception of tax evasion. The analysis is conducted on ten different taxes and the results differ widely. Hence, we show that it is important to study different taxes separately rather than treating tax evasion as one common phenomenon. In this paper we focus on the importance of different kinds of trust. Whether or not people in general are regarded as trustworthy only has a minor impact on perceived tax evasion. Instead, what matters is trust or distrust in politicians. People who distrust the parliament are more likely than others to think that tax evasion is common, and the result holds for most of the taxes studied. This may have severe long-run consequences for the welfare state. If people stop trusting their leading politicians, social norms about tax compliance deteriorate and the possibilities of collecting taxes for maintain- ing the welfare state are reduced.
Keywords: trust in politicians; generalized trust; social capital; general welfare state; tax policy; tax compliance
21 pages, September 27, 2005
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