The Impact of Social Capital on Tax Morale in 44 Countries

According to some estimations, tax avoidance and evasion cost about $427 billion for governments worldwide. While most of the recent studies on this problem are focused on tax havens, large corporations, and political elites, the individuals are proved to be also involved in significant tax evasion. Using the dimension reduction methods and the data from World Values Survey, I study the intrinsic motivation of people to pay taxes and how different dimensions of social capital affect it. I look at the differences of these effects across different groups of countries depending on their economic and political freedom development. Regression analysis shows the importance of differences in social capital in countries with cultural, historical, and economic distinctions affecting the tax morale of individuals.