By Malahayati Sari 0806435532

1. What Shapes Attitudes Toward paying Taxes?Evidence from Multikultural European CountriesBenno Torgler By Malahayati Sari 0806435532

2. Outline • Objective • Culture and Institution • Political Attitudes and Religiosity • Empirical Model • Empirical Result • Conclusion

3. Objective • Citizen’s attitudes toward paying taxes defined as tax morale helps to explain the high degree of tax compliance • Paper is unique in its examination of citizen tax morale within three multicultural European countries, Switzerland, Belgium, and Spain • Switzerland : a land with strong democratic right and German, French, Italian –speaking individual • Belgium : a country with two main linguistic region • Spain : a nation of region with strong ethnic identities

4. Cont’d • Allingham & Sandmo (1972) : assume the extent of tax evasion to be negatively correlated with the probability of detection and degree of punishment • Alm (1999) & Torgler (2002) : The deterrence models predict far too little compliance and far too much tax evasion. • Frey & Feld (2002), Graetz & Wilde(1985) : a large gap exist between the effectively reported degree of risk aversion and the amount required to guarantee compliance and tax morale as a black box • Torgler (2003a) : tax morale significantly reduced tax evasion • The measure of tax morale is not individual behavior but individual attitude • Compliance behavior across culture are driven by difference s in tax administration and citizen attitude towards goverment • By examining tax morale in three multicultural European countries, the analysis focuses rather on cultural and institutional differences within countries

5. Culture and Institutions • Culture can be viewed “as a tool kit” of symbol, stories, ritual which people may use in varying configurations to solve different kind of problem • The institutional analysis has provided interesting insights in to the role of culture in the emergence and perpetuation of institutional and organizational trajectories • Societies are so intolerant or distrustful that their goverment simply cannot function effectively

6. Cont’d • Compliance rate vary between states : Spain and U. S, Switzerland and Costa Rica • Research by survey data make vary result • Focusing on cultural and institutional differences within (rather than between) should better isolate the impact of such determinants on tax morale • In other words, the more involved citizens are in establishing the rules, the stronger their sense of obligation

7. Political Attitude and Religiosity • Because this two variable can also affect tax morale, this study includes as variable trust in state institution, national pride, and pro democratic attitude • And religion can be seen as a proxy for such characteristic as work ethic, tolerance and trust, it act as supernatural police that enforce accepted rules • Religiosity proxied by frequency of church attendance

8. Empirical Model • Data from World Values Survey (1990-1993 & 1995-1999) and the European Values Survey (1999-2000) • Besides integrating personality and demographic factor in to a multiple regression analysis, they measure individual attitudes toward tax paying by asking whether cheating if the chance arise is always justified, never justified, or something in between • Model : TM = β0 + β1.CULTi + β2.INSTi + β3.PATTi + β4.RELi + β5.Tsi + β6.DEMi + β7.ECON + εi

9. Cont’d • Added variabel audit probability, fine rate, individual tax rate in observation at Swiss • Variabel:CUL(Culture), INST(Institution),PATT(Political attitude), REL(Religiosity), TS(Tax system), DEM(Demographic factor, such gender), ECON (Economic Variabel) • Use Weighted ordered probit and weighted probit estimation • Shows only the marginal effect for the highest tax morale

10. Result Switzerland : table 1 • A higher degree of direct democracy leads to higher tax morale also higher trust and national pride • French speaker have a lower, Italian speaker a higher tax morale than German speaker • Culture plays a significant role in the determination of individual tax morale • Religiosity has a positive effect on tax morale • The deterrence factor, have marginal effect very low • Women, individual (between 50-64), married people, part time employee, retire individual and people who stay at home have significantly higher level of tax morale

11. Result Belgium : Tabel 2 • Indicate no statistically significant difference between cultural groups • Flemish population exhibits lower tax morale than French, national and pro democratic stronger among French speaker • National pride and trust have a positive impact on tax morale • Pro democratic attitudes also religiosity have a highly significant positive effect on tax morale • The tax rate has no significant impact on tax morale • The higher income tends to lead to lower tax morale • Women, the 50-64 group,married people report higher tax morale

12. Result Spain : Tabel 3 • The Wald test indicates that culture plays a significant role in the determination of individual tax morale • Navarre and the Baque country have lower tax morale • For Basque country there are tax morale increased significantly over time • The higher autonomy does not lead to significantly higher tax morale • Pride, trust , pro democratic have a significan positive impact on tax morale, but not in Religiosity • Women more compliance,widowed shows the highest tax morale, part time employee have lower tax morale

13. Conclusion • Trust in legal system, goverment, parliament,national pride, pro democratic attitude have positive effect on tax morale, this provided evidence that higher legitimacy for political institution leads to higher tax morale • Switzerland direct democracy has a strong impact on tax morale • Spain more autonomy does not necessary lead to more support for goverment taxation, possibly because separatist tendencies and unfinished fiscal decentralization process • In Switzerland and Belgium, religiosity have impact tu tax morale ,not in spain • This paper provides new insight in to the factor that shape the emergence and maintenance of citiens, willingness to cooperae with tax legislation

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