Is There a Democracy Threshold to Cheat Less on Taxes?

Konukcu Önal D., Çavuşoğlu A. T.

35th International Public Finance Conference, Antalya, Turkey, 14 October - 17 November 2021, pp.360-365

  • Publication Type: Conference Paper / Full Text
  • City: Antalya
  • Country: Turkey
  • Page Numbers: pp.360-365
  • Hacettepe University Affiliated: Yes


The influence of social norms on tax compliance has been the integral part of the taxation literature for years. In this context, this study revisits the nexus between democracy and tax compliance for a sample of 58 countries. The study substantially differs from others with respect to the democracy indicators and the methodology employed in its empirical analyses. That is, while investigating the role of democracy on cross-country differences in tax morality four different quantitative measures of democracy are appropriated to justify the robustness of findings. Moreover, the analysis is based on the detection of a threshold that differentiates the asymmetric effects of weak and strong democratic norms in explaining the country-specific tax moralities, rather than searching solely for the presence of a relationship between democracy and tax morality. The threshold analysis in this study is carried out by Hansen’s threshold regression approach. Tax morality is proxied by country scores calculated by the individual responses given in the sixth wave of the World Values Survey. Implications of our findings on democracy-led tax morality are two-fold. One, tax morality is significantly lower in countries with below-threshold democracy than those with above-threshold democracy. Two, the contribution of democracy to tax morality is more in below-threshold democracies than in above-threshold democracies. Altogether, these two implications point out the fact that democratization improves morality of the taxpayers especially in countries which have plenty of scope for improving democracy.