Tax morale is significantly correlated with tax effort and tax compliance in both high-income and developing countries (Daude et al., 2012; OECD, 2013a). Evidence on increasing tax morale to create a culture supportive of taxpaying is primarily based on econometric analysis using public opinion surveys, with few rigorous evaluations of efforts to create a taxpayer culture.
Public perceptions of the fairness of the tax system and the belief that tax money will be well spent are highlighted in many studies as being important to tax morale and compliance (Fjeldstad & Heggstad, 2012; Ali, Fjeldstad, & Sjursen, 2013; OECD, 2013a). Tax morale tends to be correlated with support for democracy, age, claiming a faith or religious identity, higher education, and being employed full-time; there is also weak and contested evidence that women may have higher tax morale than men (OECD, 2013a). Afrobarometer survey data in Kenya, Tanzania, Uganda and South Africa shows that tax morale and compliance are positively associated with credible enforcement, satisfaction with public service provision and avoidance of payments to non-state actors, perceptions of other people’s compliance, a sense that one’s ethnic group is fairly treated, and tax knowledge and awareness (Ali et al., 2013). However, the significance of these factors varies from one country to another. Another study in Mozambique, Tanzania, and Zambia also noted the importance of: a sense of a moral obligation to pay; the magnitude of the tax burden; ease of compliance; speed and accuracy of detection of non-compliance and corrective measures; and severity of deterrent measures (Fjeldstad & Heggstad, 2012). Many of the factors associated with compliance are interconnected.
Key measures to improve compliance are outreach and education, improving payment and processing services, and credible deterrence and enforcement (OECD, 2013a; 2013b). Outreach can be through business or civil society associations which allow discussion or bargaining between government and citizens on tax issues. Education can be through different forms of media and schooling, and can involve teaching tax payers their responsibilities, how to pay their taxes, and how tax money will be spent. Modernising tax administration can improve tax related processes; credible deterrence requires accurate identification of tax evaders and appropriate punishment. Identifying the range of citizens’ attitudes towards tax can improve targeting of tax compliance programmes.
Key reading
OECD. (2013a). What drives tax morale? (Draft for consultation). Paris: OECD.
This draft policy brief is based on a literature review and econometric analysis using global public opinion surveys. The brief suggests that civil society, business organisations and the international development community could support the efforts of governments to improve tax morale and tax compliance by: strengthening and clarifying the links between revenue and expenditure, analysing citizens’ attitudes and perceptions towards tax, understanding the informal sector better, increasing the transparency of tax policy making, modernising tax administration procedures and aligning efforts in different areas to avoid negative interactions among the drivers of taxpayer compliance behaviour (opportunity, economy, social norms, fairness and trust, and deterrence).
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OECD. (2013b). Overview: A new era for taxpayer education. In Building Tax Culture, Compliance and Citizenship: A Global Source Book on Taxpayer Education (ch. 1). Paris: OECD.
This background chapter is based on a review of academic and policy literature and is an introduction to a book of 28 case studies on taxpayer education, mostly from developing countries. Taxpayer education includes government programmes to encourage tax-compliant behaviour, efforts by business organisations to mobilise and represent the interests of their members, and civil society initiatives to bring citizens into tax policy debates. To build a tax culture, it is important to teach taxpayers how to file their taxes, keep them informed of changes in tax laws, encourage people to pay their taxes, and educate schoolchildren and university students in tax literacy. Taxpayer education can be conducted via internet-based technologies, television and entertainment media, and outreach to the informal sector. The chapter recommends exchanging knowledge and sharing best practices on taxpayer education; measuring the impact of taxpayer education initiatives in terms of enhanced compliance; expanding regional co-operation following the Latin America and Caribbean model; and increasing development co-operation support on taxpayer education.
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Fjeldstad, O-H. & Heggstad, K. K. (2012). Building taxpayer culture in Mozambique, Tanzania and Zambia: Achievements, challenges and policy recommendations (CMI Report R 2012:1). Bergen: Chr. Michelsen Institute.
This study, based on a literature review and interviews, examines citizen attitudes to tax, taxpayer education, and government-citizen tax engagement measures. Enhancing compliance is generally though taxpayer education and outreach to ensure that taxpayers are aware of their obligations; taxpayer services to ensure that tax payment and processing are simple and easy; and credible deterrence and enforcement. The paper does not evaluate these approaches. Factors affecting compliance include: people’s sense of moral obligation to pay; the extent to which taxpayers believe that the government spends their tax money wisely; fair and transparent treatment of taxpayers; the magnitude of the tax burden; the ease of tax compliance; the speed and accuracy of detection of non-compliance and corrective measures; the severity of deterrents; perceptions of whether others are paying their fair share; and taxpayer knowledge.
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Ali, M., Fjeldstad, O.-H., & Sjursen, I. H. (2013). To pay or not to pay? Citizens’ attitudes towards taxation in Kenya, Tanzania, Uganda and South Africa. (Afrobarometer Working Paper no. 143). Afrobarometer.
Based on the 2011/12 Afrobarometer survey data, this econometric analysis identifies factors that determine citizens’ attitudes towards tax-compliance in Kenya, Tanzania, Uganda and South Africa. The factors varied between countries, but attitudes to paying taxes were found to be more favourable when people perceive that there is credible enforcement to prevent tax evasion, are satisfied with provision of public services which they feel are important, do not have to pay non-state actors (e.g. criminal gangs) for services, perceive others to be tax-compliant, and have tax knowledge and awareness. Citizens’ perception of how their ethnic group is treated by the government was associated with tax compliance in South Africa and Tanzania, but not in Kenya or Uganda. The study found no strong evidence of a relationship between tax compliance and trust in government and political legitimacy.
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- ‘The motivation of a country’s citizens to paying taxes, in addition to legal obligations.’ Daude, C., Gutiérrez, H., & Melguizo, Á. (2012). What drives tax morale? (Working Paper No. 315). Paris: OECD Development Centre.
- For further information the drivers of taxpayer compliance behaviour see Forum on Tax Administration: Small/Medium Enterprise (SME) Compliance Subgroup (2010). Information Note Understanding and Influencing Taxpayers’ Compliance Behaviour. OECD.
- Daude, C., Gutiérrez, H., & Melguizo, Á. (2012). What drives tax morale? (Working Paper No. 315). Paris: OECD Development Centre. See document online
