Numerous regulations and tax changes are making income tax returns increasingly complex and non-transparent. Reports of other people’s uncertainty about declaring their taxable income can undermine taxpayers’ individual tax morale. They become more lenient towards tax evasion as the tax problems of others become more understandable. This effect is even stronger for older people and those with a more left-wing political orientation, according to a study by ZEW Mannheim. For the study, more than 4,000 German citizens were interviewed in a representative survey.

Symbol image with tax returns, woman and calculator.
According to a ZEW study, insecurity of others regarding tax returns lowers one’s own tax morale.

Germany is considered a country with a comparatively high tax morality where tax evasion is associated with a social stigma, previous studies show. ZEW researchers investigated how information about the perceived insecurity of others affects one’s own tax morale and specifically the attitude towards and acceptance of tax evasion in general by means of an experimental survey based on data from the German Internet Panel (GIP).

For the study, respondents were randomly divided into three groups. “All groups were told at the beginning that the media often report on tax evasion. While the first group did not receive any further information, the other two read that tax laws are often complicated and that taxpayers similar to them in terms of profile are therefore often unsure whether they have really declared all their income correctly,” explains Sebastian Blesse, researcher in ZEW’s “Corporate Taxation and Public Finance” Department and author of the study. Only the third group received the additional note that expert taxpayers or those who hired a tax advisor could use the tax complexity to their advantage and thus reduce their tax burden.

Social influences have an impact on tax morale

The results of the study revealed differences between the groups: Those who read about the uncertainty of others in preparing their tax return softened their view on tax morality in a significant way compared to the group without this information. While about 41 per cent in the first group say tax evasion is absolutely unacceptable, the other groups show more tolerance towards this statement. Only about 28 per cent of the second group consider that tax evasion is not justifiable at all. The additional information provided to members of the third group that other taxpayers could use complex tax rules in their favour also reduces tax morale. Here, around 33 per cent state that tax evasion is absolutely not justifiable. “According to our study, uncertainty regarding tax returns from others thus lowers one’s own tax morale. This is mainly due to the fact that problems in filling out tax returns are very relatable for taxpayers, because in their own experience, tax returns are also becoming more and more complicated. However, this does not mean that approval for deliberate tax evasion is increasing,” says Blesse.

Insecurity influences certain socio-demographic groups more strongly

The ZEW study also examines which socio-demographic groups consider tax evasion to be acceptable or not justifiable at all. In addition to characteristics such as gender, age, marital status or employment status, net household income and political preference were also included in the analysis. The results suggest that female taxpayers have a higher tax morale than male taxpayers. Respondents aged 48 and older, on the other hand, are more likely than younger taxpayers to lower their standards of tax morality due to the insecurity of others.

The survey also shows that higher-earning taxpayers have greater expectations of tax morality than those with lower incomes. The analysis also reveals that tax morale rises with increasing level of education. Characteristics such as household size, employment status and retirement, on the other hand, do not have an influence on tax morale. The situation is different for political attitudes: Taxpayers with a more left-wing political orientation are more strongly influenced by the insecurity of others than conservative taxpayers. The study makes it clear that citizens who are attached to left-wing ideologies are more sympathetic to the tax problems of others and, in this context, significantly lower their demands on tax morality.

“In very complex and complicated tax systems, tax morale can decline as a result of social influences. Political decision-makers should therefore promote simplified rules for income tax returns in future tax reforms in order to counteract the danger of a decline in tax morale,” says ZEW researcher Blesse, summarising the results.




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