Societal diversity, group identities and their implications for tax morale

• Published in: Journal of Comparative Economics 2023-09, Vol.51 (3), p.1048-1067
• Main Authors: ten Kate, Fabian, Klasing, Mariko J., Milionis, Petros
• Format: Article
• Language: English
• Subjects: Cultural values; Diversity; Identity; Social cleavages; Tax evasion; Tax morale
• ISSN: 0147-5967; 1095-7227
• DOI: 10.1016/j.jce.2023.04.005

We study how the tax morale of individuals is influenced by societal diversity in their place of residence. Using data from the World Value Survey, we compare the effects that diversity has on self-reported measures of tax morale at the national, sub-national and individual level. We show first that, both across countries and within countries across sub-national regions, greater diversity is associated with lower average levels of tax morale. We then document that within countries and regions tax morale is lower among individuals who are less similar to others and this effect operates more strongly in places characterized by higher levels of diversity. This pattern applies to diversity in terms of different social cleavages, including income, ethnicity, language or religion, but is particularly pronounced when it comes to diversity in terms of cultural values. This suggests that social identification is important for how people perceive their responsibility of paying taxes. •Both across and within countries tax morale is lower in more diverse places.•Across individuals tax morale is lower for those who are less similar to others.•Higher diversity makes tax morale more sensitive to similarity across individuals.•Similarity in cultural values is a strong predictor of high tax morale.