This document summarizes a presentation given by Angel Melguizo at the OECD Task Force on Tax and Development about factors that influence tax morale. It discusses how tax morale is affected by perceptions of corruption, trust in government, satisfaction with public services, and support for democracy based on analyses of surveys in Africa, Asia, and Latin America. Higher tax morale is associated with lower perceived corruption, greater trust in government, higher satisfaction with healthcare, education, and social services, and more support for democracy. More data and research is still needed to better measure and understand tax morale across different countries and regions.

1. What Drives Tax Morale?
Angel Melguizo
Head of the Latin American and Caribbean Unit
OECD Development Centre
5th Plenary Meeting
OECD Task Force on Tax and Development
Paris, 2-3 November 2015

2. 2
40%
45%
50%
55%
60%
65%
70%
75%
1998 2003 2005 2008 2009 2010 2011 2013 2015
Latin America: Tax evasion is never justified
Source: Latinobarometro

3. 3
Taxes are not just an issue of different levels of economic development
0
10
20
30
40
50
60
3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8
TaxrevenuesasshareofGDP(2005,percentage)
GDP per capita in PPP (logs, 2005)
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

4. 4
Motivation
• Low tax levels should not be exclusively attributed to non-capable tax
administrations and poor enforcement of the tax code, but also to social
preferences
• Fiscal legitimacy in developing countries is often low, as citizens in
developing countries frequently do not trust that tax revenues are well
spent, making them less willing to pay
 Better administration or enforcement may not be enough.
Additional efforts and proposals related to improving the
taxpayer-government relationship are needed
Key to identify, measure and estimate the impact of these issues to design
effective policies

5. 5
Rationale
• Tax policy cannot be analyzed separately from expenditures
- Government (inter-temporal) budget contraint
- Political economy: citizens/firms may be willing to pay higher taxes
if they receive (perceived) more/better public services
• Main approaches
-Tax-benefit analysis: Fiscal policy impact on households’ incomes
- Laboratory experiments
- Soft data analysis: Relevance of presenting indicators that engage
with perceptions of citizens

6. 6
Micro-econometric evidence (OECD, 2013)
What factors explain tax morale differences across countries?
Do you justify cheating on taxes if you have the chance? 1 (always) – 10 (never),
World Value Survey, circa 2005
55 countries (out of 90); around 52,000 observations

7. 7
0%
20%
40%
60%
80%
100%
Western
and Central
Europe
Eastern
Europe
Asia Africa Latin
America and
Caribbean
Anglosaxon
%ofrespondendtsneverjustifyingcheatingontaxes
Avg Max Min
Tax morale at a glance (% justifying cheating on taxes)
Tax morale varies a lot across regions (OECD, 2013)
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

8. 8
y = 0.387x + 7.761
R² = 0.045
5
6
7
8
9
10
1.5 2 2.5 3 3.5 4
TaxMorale
Trust in Government
Panel A
r = 0.2120
p-value: 0.1202
y = 0.211x + 7.986
R² = 0.004
5
6
7
8
9
10
2.5 3 3.5 4 4.5
TaxMorale
Having a democractic political system
Panel B
r = 0.0642
p-value: 0.6415
Correlation between tax morale, trust and democracy
Trust and political values matter … (OECD, 2013)
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

9. 9
… and demand for redistribution as well (OECD, 2013)
Justification of tax cheating (10: max) vs.
Social class
Justification of tax cheating (10: max) vs.
Demand for redistribution
Source: World Value Survey 2005-2006 Source: World Value Survey 2005-2006
1
1.5
2
2.5
3
3.5
4
4.5
5
3 4 5 6 7 8 9
Justificationforcheatingtaxes
Redistribution role for the government in a democracy
(10: maximum)
1
1.5
2
2.5
3
3.5
4
4.5
5
2 2.5 3 3.5 4 4.5
Justificationforcheatingtaxes Social class (from upper =1 to lower = 5)

10. 10
• Marital status (married/living together; divorced/separated; widow/single)
• Religious (1 = respondent considers herself religious)
• Female (1 = female)
• Educational attainment (1 = no formal education … 9 = university degree)
• Employment status (full-time; part-time; self-employed; retired; housewife; student;
unemployed; other)
• Income quintile (self-perceived relative position)
• Economic problems (1 = cannot save or had to borrow to satisfy needs)
• Support for democracy (having a democratic system is very bad =1 … very good =4)
• Trust in government: confidence in national government (1 none at all – 4 a great deal)
• Redistribution: tax the rich and subside the poor (1 not essential – 10 essential)
• Meritocracy: hard work usually brings a better life (1 = yes; 10 =it is a matter of luck and
connections).
Testing socio-economics and politics (OECD, 2013)

11. 11
Perceptions and socioeconomics (OECD, 2013)
Marginal effects on the probability of reporting high tax morale
(Never justifying tax evasion)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Supportfor
Democracy
Age Trust in
Government
Female Religious Educational
Attainment
Source: OECD (2013), What drives tax morale?. OECD Tax and Development.

12. 12
Trust and politics impact differently (OECD, 2013)
Marginal effects on the probability of reporting high tax morale
(Differences with respect to Anglo-Saxon countries)
-12.0%
-8.0%
-4.0%
0.0%
4.0%
8.0%
12.0%
SupportforDemocracy
TrustinGovernment
SupportforDemocracy
TrustinGovernment
SupportforDemocracy
TrustinGovernment
SupportforDemocracy
TrustinGovernment
SupportforDemocracy
TrustinGovernment
Western Europe Eastern Europe Asia Africa Latin America
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

13. 13
• Socio-demographics: religiousness, gender, relative income, age
composition of the population (might relate to type of social insurance
and programs; or stigma of evading taxes)
• Economic conditions: lower tax morale among unemployed or people
struggling to get by
• Education double dividends: e.g. Educational upgrading seems to lead
towards greater tax morale (public service link?)
• ‘Policies’: Perceptions on the functioning of democracy, transparency
and fairness are important
• Regional differences (unexplained)
Source: OECD (2013), What drives tax morale?. OECD Tax and Development
Summing up (OECD, 2013)

14. 14
Africa
(Afrobarometer)
Asia
(AsiaBarometer)
Latin America and Caribbean
(Latinobarómetro)
World Values Survey
Tax Morale
'Do you think is not wrong at all, wrong
but understandable, or wrong and
punishable to not paying taxes owed
on income'
'Would you like to see more or less government
spending in each area (for several areas of government
spending )? Please bear in mind that more spending may
require a tax increase'
-Tax evasion is never justified
- Do you think good citizens
should pay taxes?
- Do you justify cheating on
taxes if you have a chance?
- Do you justify claiming
benefits you're not entitled to?
Satisfaction with public
services
'How would you say the government is
handling: improving healthcare (among
different aspects of government action, each
asked separately)'
- 'How well you think your country's government is
dealing with the following issues?'
Quality of public services (for several areas, each asked
separately).
- 'How satisfied are you with these aspects in your
life?' health/education/social welfare system/security
(for several areas, each asked separately ).
'Are you satisfied in the way
(public education, public
healthcare, among others)
works?'
N/A
Tax accountability
'Parliament should ensure that the
President explains to it on a regular
basis how his government spends the
taxpayers’ money'
N/A N/A N/A
Perception of Corruption
'How many people do you think are
involved in corruption' (for different
authorities, each asked separetly )
'How much you agree with the statement "there is
wide spread corruption among those who govern the
country"?'
'Which do you consider is the
main problem in your country?'
Out of several possibilities,
' corruption' is an answer .
N/A
Support for/satisfaction
with democracy
- With which statement do you agree:
democracy is preferable to any other
kind of government (other answers
possible )
- How satisfied are you with the way
democracy works in your country?
'How satisfied are you with these aspects in your
life?'
The democractic system (for several areas, each asked
separately).
- With which statement do you
agree: democracy is preferable to
any other form of government
(other answers possible )
- How satisfied are you with the
way democracy works in your
country?
'How good would you say is
having a democractic political
system for governing your
country?'
Trust in government
'How much do you trust each of the
following: President/ National
Assembly?' (for different authorities,
each asked separately)
'To what extent do you trust the <Central
Government> to operate in the best interestes of
society?' (for different institutions, each asked
separately)
'How much trust do you have in
the following institutions?' (for
different institutions, each asked
separately)
'How much confidence do you
have in the government (in your
nation's capital)?'
Comparing databases: apples and oranges? (OECD, 2013)

15. 15
Regional patterns I: An example based on Afrobarometer
Tax morale is higher where corruption is under control
BEN
BWA
BFA
CPV
GHA
KEN
LSO LBR
MDG
MWI
MLI
MOZ
NAM
NGA
SENZAF
TZA UGA
ZMB
ZWE
y = -0.9342x + 3.761
R² = 0.0319
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
0.0% 10.0% 20.0% 30.0% 40.0%
TaxDepartmenthasrighttomakepeoplepay
All government officials are corrupt (% of
respondents)
Panel A
r = (0.1786)
p-value: 0.4512
BEN
BWA
BFA
CPV
GHA
KEN
LSO LBR
MDG
MWI
MLI
MOZ
NAM
NGASENZAF
TZA UGA
ZMB
ZWE
y = -1.2809x + 3.8359
R² = 0.2084
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
0.0% 10.0% 20.0% 30.0% 40.0%TaxDepartmenthasrighttomakepeoplepay
All tax officials are corrupt (% of respondents)
Panel B
r = (0.4565)
p-value: 0.0430
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

16. 16
Regional patterns II: An example based on AsiaBarometer
Trust in government strengthens the social contract
CHN
HKG
JPN
KOR
SGP
TWN
MYS
IDN
PHL
THA
INDPAK
AFG
LKA
KHM
BGD
MDV
BTN
MNG
NPL
TJK
TKMKGZ
UZB
KAZ
y= 0.222x + 3.203
R² = 0.232
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
1 1.5 2 2.5 3 3.5 4
Willingtopaytoseemorepublicspending
Trust in Central Government
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

17. 17
Regional patterns III: An example based on Latinobarómetro
Satisfaction with democracy boosts tax morale
ARG
BOL
BRA CHLCOL
CRIDOM
ECU
SLV
GTM
HND
MEX
NIC
PAN
PRY
PER
URY
VEN
y = 0.339x + 7.616
R² = 0.032
6.5
7.0
7.5
8.0
8.5
9.0
9.5
1.8 2.3 2.8
TaxMorale
Satisfaction with democracy
r = 0.1787
p-value: 0.4780
Source: OECD (2013), What drives tax morale?. OECD Tax and Development

18. 18
Countries show higher tax morale when healthcare services are appreciated
BEN
BWA
BFA
CPV
GHA
KEN
LSOLBR
MDG
MWI
MLI
MOZ
NAM
NGA
SEN ZAF
TZAUGA
ZMB
ZWE
y = 0.3833x + 2.661
R² = 0.2229
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
1.5 2.0 2.5 3.0 3.5
TaxDepartmenthasrighttomakepeoplepay
Satisfaction with improving healthcare
r = 0.4721
p-value: 0.0356
Source: OECD (2013), What drives tax morale?. OECD Tax and Development
Regional patterns I: An example based on Afrobarometer

19. 19
Satisfaction with social services is associated with higher tax morale
CHN
HKG
JPN
KOR
SGP
TWN
VNM
MYS
IDN
PHL
THA
INDPAK
AFG
LKA
KHM
LAO
BGD
MDV
BTN
MNG
NPL
TJK
TKM KGZ
UZB
KAZ
y = 0.4742x + 2.2088
R² = 0.1385
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
3 3.2 3.4 3.6 3.8 4
Willingtopaytoseemorepublicspending
Satisfaction with social services
Panel B
r = 0.3722
p-value: 0.0556
Source: OECD (2013), What drives tax morale?. OECD Tax and Development
Regional patterns II: An example based on AsiaBarometer

20. 20
Satisfaction with education is associated with higher tax morale
ARG
BOL
BRACHLCOL
CRI DOM
ECU
SLV
GTM
HND
MEX
NIC
PAN
PRY
PER
URY
VEN
y = 0.914x + 6.23
R² = 0.323
6.5
7.0
7.5
8.0
8.5
9.0
9.5
1.0 1.5 2.0 2.5 3.0 3.5
TaxMorale
Satisfaction with public education
Source: OECD (2013), What drives tax morale?. OECD Tax and Development
Regional patterns III: An example based on Latinobarómetro

21. 21
Towards Tax and Development 3.0?
• Empirical literature confirms the potential impact of tax
morale in the domestic resource mobilisation agenda
• Measuring and evaluation of tax morale is limited by data:
country coverage, sample size, comparability across regions,
questions
• International benchmarking, plus in-depth country (including
experiments) are needed

22. 22
Source: FT
Neves 48%
Rouseff 52%

23. Gracias
5th Plenary Meeting
OECD Task Force on Tax and Development
Paris, 2-3 November 2015
Angel Melguizo
Head of the Latin American and Caribbean Unit
OECD Development Centre