Narrow Results

We embed the behavior of tax evasion into the standard two-dimensional Ising model. In the presence of an external magnetic field, the Ising model is able to generate the empirically observed effect of tax morale, i.e., the phenomenon that in some countries tax evasion is either rather high or low. The external magnetic field captures the agents' trust in governmental institutions. We also find that tax authorities may curb tax evasion via appropriate enforcement mechanisms. Our results are robust for the Barabási–Albert and Voronoi–Delaunay networks.

In this paper, we present a new agent-based model for the simulation of tax compliance and tax evasion behavior (SIMULFIS). The main novelties of the model are the introduction of a "behavioral filter approach" to model tax decisions, the combination of a set of different mechanisms to produce tax compliance (namely rational choice, normative commitments and social influence), and the use of the concept of "fraud opportunity use rate" (FOUR) as the main behavioral outcome. After describing the model in detail, we display the main behavioral and economic results of 1,920 simulations calibrated for the Spanish case and designed to test for the internal validity of SIMULFIS. The behavioral outcomes show that scenarios with strict rational agents strongly overestimate tax evasion, while the introduction of social influence and normative commitments allows to generate more plausible compliance levels under certain deterrence conditions. Interestingly, the relative effect of social influence is shown to be ambivalent: it optimizes compliance under low and middle deterrence conditions, but not when deterrence is made harder. Finally, SIMULFIS economic outcomes are broadly in line with theoretical expectations, thus supporting the reliability of the model.

In recent years, a new institutionalist theory has emerged to explain the prevalence of informal sector entrepreneurship. This argues that formal institutional failures lead to the emergence of an asymmetry between the formal rules (laws and regulations) and the norms, values and beliefs of entrepreneurs regarding the acceptability of participating in the informal sector, which in turn leads to the prevalence of informal entrepreneurship. The aim of this paper is to evaluate this social actor approach by reporting evidence from 453 face-to-face interviews with a nationally representative sample of entrepreneurs in FYR Macedonia. This reveals not only a significant association between participation in the informal economy and the non-alignment of entrepreneurs’ views with the formal rules, but specific formal institutional failings that are significantly associated with the acceptability of informal entrepreneurship, namely poor quality public services, a lack of tax fairness, corruption and instability in the formal institutions. The theoretical and policy implications are then discussed.

This research presents empirical results about the importance of tax morale in the probability of tax compliance in social businesses. It highlights the relevance of increasing the intrinsic value to the social business owner on paying taxes, instead of the traditional approach of increasing punishment, to reduce non-compliance. The paper suggests changing the focus question from “Why don’t they pay taxes?” to “Why, despite the low probability of being punished for not paying taxes, do some social business owners comply with their tax contribution?”. The main results of the research point out that factors such as public expenditure in economic development increases the probability of tax compliance in social businesses, whereas public expenditure in social programs decreases this probability.

The purpose of this paper is to examine the hierarchical effects of Public Health Responses (PHRs) and fiscal policy measures (FPMs) on the tax morale (TM) of entrepreneurial firms in Nigeria during the COVID-19 pandemic. The theoretical basis for the study is based on social contract theory (SCT) and fiscal exchange theory (FET), which oblige entrepreneurs to pay taxes to the state in return for public goods and social services. Using a cross-sectional survey design, we collected primary data from 177 professional managers of entrepreneurial firms in Nigeria using online questionnaires. The sampled firms were accessed with the support of the Lagos Chamber of Commerce. Data collected at a point in time reflecting respondents’ views on the impact of PHRs and FPMs on TM were analyzed using hierarchical regression analysis. Three estimates emerged from the hierarchical regression analyses. The first estimation suggests that the PHRs have a significant positive effect on the TM of entrepreneurial firms. The second estimate suggests that the FPMs do not have a significant positive effect on the TM of entrepreneurial firms. The third estimation found that the interactive effects of PHRs and FPMs do not have a significant positive effect on the TM of entrepreneurial firms. The study, although modest, contributes to the literature on the entrepreneurial behavior of firms and tax morals in a period of economic uncertainty. The study provides valuable insights and validates the social contract and fiscal exchange theories in the recessionary period.