Many articles have been written about tax evasion. Most of them have appeared in the accounting, economics and public finance literature. The usual thrust of these articles is to discuss technical aspects of tax evasion. Practitioner journals address legal aspects and evasion techniques. Scholarly journals focus on lost tax revenues or reasons why collections are not more efficient. Ethics is seldom discussed, or when it is discussed, it is usually done superficially. Oftentimes the discussion begins with the premise that what is illegal is also unethical.
The present paper is different. This paper begins with an overview of the ethical literature that has been published on tax evasion and proceeds to present the results of an empirical study that solicited views on the ethics of tax evasion from participants in six countries. This study had several goals. One goal was to rank the main arguments that have been used to justify tax evasion on ethical grounds over the last 500 years. Another goal was to determine which categories of arguments drew the most support from a wide range of cultures.
BACKGROUND ON TAX EVASION
Tax evasion has a long and distinguished history. Adams (1982, 1993) and Webber and Wildavsky (1986) trace the history of taxation and tax evasion back 5,000 years to ancient Egypt. Baldwin (1967), Beito (1989), Larson (1973), Rabushka and Ryan (1982) and Valentine (2005) have written about tax revolts while Greenwood (2007) and Holmes and Sunstein (1999) give us reasons why taxpayers should not revolt. Chodorov (1954), Cowell (1990), Graetz and Shapiro (2005), Gross (1995), Johnston (2003, 2007), Lewis and Allison (2002), Myddelton (1994) and Shughart (1997) tell us what is wrong with the current system. Hall and Rabushka (1985) have argued in favor of a flat tax to increase fairness whereas McCaffery (2002) argues that the flat tax is not fair. Others have argued that the income tax must be abolished altogether (Curry, 1982; Hultberg, 1996; Sabrin, 1995). Alm, Martinez-Vazquez and Rider (2006), Edwards and Mitchell (2008) and Mutti (2003) have examined tax competition and the effect it has on economic reform and foreign direct investment.
David Ricardo (1817; 1996) wrote the first classic treatise on taxation. Musgrave and Peacock (1958) collected and reprinted a number of other classic treatises on taxation and public finance. Musgrave made a number of other contributions to the literature of public finance (Musgrave, 1959, 1986; Musgrave and Musgrave, 1976) and participated in a scholarly debate with Nobelaureate James Buchanan on the proper role of taxation in society (Buchanan and Musgrave, 2001). James Buchanan and others have examined public finance theory from the perspective of public choice theory (Buchanan, 1967; Buchanan and Flowers, 1975; Cullis and Jones, 1988).
The most comprehensive literary survey of tax evasion in the twentieth century was done by Martin Crowe (1944), who examined the Christian (mostly Catholic) tax evasion literature over the prior 500 years, much of which was in Latin. He brought this literature to the attention of English speaking scholars. McGee (1994, 1998a, 1999a, 2006) used the Crowe study as the basis for several theoretical and empirical studies of tax evasion. Torgler (2003) conducted a comprehensive, multi-country study of tax morale that expanded on the Crowe and McGee studies.
A number of country studies have focused on various aspects of tax evasion. McGee (1999b) found that Armenians evade taxes because there is no mechanism in place to collect taxes and because they do not feel any moral obligation to pay taxes to a corrupt government that gives them nothing in return for their taxes, reasons that are also present in a number of other former Soviet republics and Soviet bloc countries as well as in Asia, Africa and Latin America.
Ballas and Tsoukas (1998) examined cultural aspects of tax evasion in Greece. Theoretical and empirical studies of tax evasion have also been conducted for Argentina (McGee and Rossi, 2006), Armenia (McGee, 2008d; McGee and Maranjyan, 2008), Bosnia (McGee, Basic and Tyler, 2008), Bulgaria (Pashev, 2008a&b; Smatrakalev, 1998, 2008), China (McGee and An, 2008), Estonia (McGee, Alver and Alver, 2008), Guatemala (McGee and Lingle, 2005, 2008), Poland (McGee and Bernal, 2006), Kazakhstan, (McGee and Preobragenskaya, 2008), Mali (McGee and M'Zali, 2008), Romania (McGee, 2005b; McGee, Basic and Tyler, 2008), Russia (Vaguine, 1998; Turley, 2008), Slovakia (McGee and Tusan, 2008), Thailand (McGee, 2008b), Ukraine (Nasadyuk and McGee, 2008) and Vietnam (McGee, 2008c).
Some multicountry studies of tax evasion have also been done. Examples include Asia (McGee, 2008a) and four Latin American countries (McGee and Palau, 2008). Inglehart et al. (2004) supervised a study that collected data on dozens of countries, including some data on tax evasion.
Other studies have focused on religious literature or religious views. Cohn (1998) and Tamari (1998) examined the Jewish literature and concluded that tax evasion is almost never justified, whereas an empirical study of Orthodox Jewish students found that there is slightly more flexibility within the Jewish community (McGee and Cohn, 2007, 2008). Theoretical studies of the Baha'i (DeMoville, 1998) and Mormon (Smith and Kimball, 1998) concluded that tax evasion is always unethical, with no exceptions.
Some of the Christian literature justifies tax evasion in certain circumstances, such as when the ruler is corrupt, when the tax system is unfair, where the tax burden is excessive or exceeds the ability to pay or where tax proceeds are used to support an unjust war. The Crowe (1944) study listed all of these reasons as being present in the Christian literature. McGee (1994, 1998c, 1999c) reviewed the Crowe study and expanded upon it.
Gronbacher (1998) examined the Catholic literature from the perspective of classical liberalism and concluded that tax evasion is sometimes justifiable on moral grounds. Pennock (1998) examined the view that evasion can be justified as a means of war resistance. Schansberg (1998) examined the Biblical view that taxpayers are morally obligated to render unto Caesar what is Caesar's and concluded that Caesar is not entitled to all of a taxpayer's income.
McGee (1997, 1998b) examined the Muslim literature and found that some Islamic scholars would justify tax evasion in cases where the tax increases the price of goods, such as in the case of sales taxes and tariffs. Those Muslim scholars would also justify tax evasion where the tax is on income.
Some philosophical studies have examined the justification for taxation or tax evasion. Block (1989, 1993) examined the public finance literature but could not find an adequate justification for taxation. He found that public finance authors did not address this question but rather began with the assumption that taxation is justified. Spooner (1870) did not address tax evasion in particular but concluded that the government of the United States is illegitimate, which might lead one to conclude that there is no moral duty to pay any taxes ever.
Leiker (1998) speculated on what Jean Jacques Rousseau would have said about the ethics of tax evasion, basing his opinion of various Rousseau works. Morales (1998) presents a sociological perspective in his examination of Mexican workers and concludes that the need to provide for the family may at times take precedence over the duty to pay taxes. Oliva (1998) discusses some of the conflicts that tax practitioners face when dealing with the tax law and clients.
DATA COLLECTION & MEASUREMENT
Business school graduate students, undergraduate students and faculty from several countries were selected to participate in the survey, which was distributed in paper format.
Respondents were then asked to complete a survey comprised of eighteen items described in the following text. Statement topics were selected based on the reasons Crowe (1944) identified to justify tax evasion over the last 500 years. Three additional reasons were added to reflect more recent justifications based on human rights abuses. The respondents were asked to indicate their agreement or disagreement with each of the items by circling a number from (1) strong agreement to (7) strong disagreement. Thus, low scores indicate an acceptance of tax evasion, while higher scores indicate a disagreement with the practice of tax evasion. This procedure resulted in eleven hundred usable surveys.
From the literature...