Why do we pay (or not pay) the taxes established by law?

Predisposition towards tax evasion is determined by a combination of personal and circumstantial factors

Edurne Bartolomé Peral, University of Deusto
Hermann Dülmer, Universität zu Köln
Lluís Coromina i Soler, Universitat de Girona

The individual decision to comply with paying taxes goes beyond a strict, rational calculation of the risks and benefits that tax evasion may represent. Various factors of a circumstantial and individual nature enter into play to design the complex equation that explains people’s degree of compliance with their fiscal obligations in Spain. Apart from the value of the tax rates and of sanctions, citizens also take into account whether the rest of the population are also complying with paying their taxes and whether the government is satisfying the contract implicit in tax collection. Furthermore, moral values, age, and level of education stand out among the personal factors that also enter into play. The lower the age or level of education, the greater a person’s predisposition towards tax evasion.
Key points
  • 1
       Citizens do not base themselves only on the amount of the taxes and the calculation of the costs and benefits of paying them or not when complying with their fiscal obligations.
  • 2
       The population is more likely to evade paying taxes if this is perceived to be a generalised practice, because the authorities are viewed as too inefficient to guarantee the fulfilment of tax obligations.
  • 3
       The perception of corruption in the country and of the government not acting to correct inequalities increases people’s predisposition towards tax evasion.
  • 4
       Moral values, level of education, and age play a very significant role when it comes to explaining tax compliance on an individual level.

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