The Institutions and the level of Tax Evasion across countries

Abstract

This paper examines tax evasion in the context of the institutions across countries. We analyze the relationship between cultural, legal and policy variables and tax evasion in several countries. Based on date from 79 countries for 2002 and ordinary least squares (OLS) regressions as research strategy, main results show that high power distance score is associated with high levels of tax evasion, whereas masculinity score and individualism score are associated with low levels of tax evasion. Public transparency score was also important because government confidence with individuals causes a reduction in tax evasion rate across countries. Tax authority, to enforce the taxpayers, was also important to reduce tax evasion across countries. Thus, policies that review the countries’ public transparency, modernize tax authority system and emphasize cultural social aspects have positive effects on tax evasion.