How does progressivity impact tax morale? Experimental evidence across developing countries.

Area of Science:

• Behavioral Economics
• Public Finance
• Development Economics

Background:

• Tax morale, or the intrinsic motivation to pay taxes, is crucial for government revenue.
• Understanding factors influencing tax morale is vital for effective tax policy and public administration.
• Previous research has explored various determinants of tax morale, but the impact of perceived tax progressivity remains less understood, especially in developing countries.

Purpose of the Study:

• To investigate the causal effect of accurate information on tax progressivity on tax morale.
• To examine how this effect varies based on individuals' prior beliefs and preferences.
• To assess the implications for tax compliance in developing economies.

Main Methods:

• A large-scale randomized survey experiment involving over 30,000 respondents across eight developing countries.
• Experimental manipulation of information provided to respondents regarding the progressivity of their country's tax system.
• Analysis of changes in self-reported tax morale based on the information received.

Main Results:

• Respondents who received accurate information indicating their country's taxes are progressive showed increased tax morale.
• Conversely, respondents informed that taxes are not progressive reported decreased tax morale.
• The impact was strongest when the provided information contradicted prior beliefs or aligned with existing preferences.

Conclusions:

• Information about tax progressivity significantly influences tax morale and, consequently, tax compliance.
• Policy interventions aimed at increasing tax progressivity could potentially enhance tax morale and voluntary tax payments.
• Future research should explore the long-term effects and mechanisms through which perceived progressivity affects taxpayer behavior.