Tax evasion – a matter of culture?

The issue of tax evasion is a delicate matter, and even more delicate if we try to establish a correlation between this phenomenon and the culture of a country… Is it possible to establish a correlation between the presence and significance of tax evasion, and the dimensions of a particular culture? Are certain cultures, and therefore certain countries, more likely to see this social and economic evil of tax evasion flourish?

Professor Grant Richardson ventured, in an article[1] published in the Journal of International Accounting, Auditing and Taxation, to answer this question. The academic took the model of cultural dimensions developed by Dutch psychologist Geert Hofstede, a model that describes any national culture using six dimensions:

  1. Individualism versus collectivism
  2. Hierarchical distance
  3. The presence of male values versus that of female values
  4. Avoidance of uncertainty
  5. Long-term orientation versus short-term orientation
  6. The level of tolerance



Tax evasion and culture

Professor Richardson also wanted to verify the effect of certain other cultural variables not included in Geert Hofstede’s model (rule of law, level of confidence in the government and the level of individual religiosity) compared to the extent of tax evasion.

The scholarly treatment of statistics of 31 countries by Grant Richardson shows that of the nine variables considered, a high level of avoidance of uncertainty and a low level of individualism, two variables of Geert Hofstede’s model, are associated with higher levels of tax evasion (see table below). And not surprisingly, we also learn that tax evasion is more common in cultures with low levels of rule of law, confidence in the government and individual religiosity.

Now it’s up to you to explain the link between a nation’s culture and the propensity of its inhabitants to evade the tax authorities! Some good debates in view! 

[1] Richardson, G. (2008). “The relationship between culture and tax evasion across countries: Additional evidence and extensions.” Journal of International Accounting, Auditing and Taxation, 17(2), 67-78.

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