Do the Catholic and Protestant Countries Differ by Their Tax Morale?
Does the tax morale differ between various countries? The paper introduces a model of tax evasion. The equilibrium shadow production is determined by consumers' and entrepreneurs' tax morale, affected by the inherited culture or religion. The model suggests that in the conditions of the prisoners' dilemma, shadow economies tend to be large once a moral code is violated. The implications of the model are tested in the OECD data on groups of countries with different religious denominations in two regimes, 1979-1992 and 1992-2003. We find evidence on a link between tax morale and shadow market activities, but none to support the view that tax morale differs between the catholic south and protestant north in Europe.
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