Most studies on taxation are written from a public finance perspective (Hyman, 1999; Kaplow, 2008; Marlow, 1995; Ricardo, 1817/1996; Rosen, 1999). They focus on issues such as how best to raise tax funds, efficiency of collection, optimum tax rates and even optimum tax evasion (Musgrave & Peacock, 1958).
Some public finance scholars have included their own ideological beliefs in a subtle manner. Musgrave (1959, 1986) and his wife (Musgrave & Musgrave, 1976) incorporated their view that the government is justified in adopting any kind of tax system it wants into their work. Their justification for this belief is that taxpayers in a democratic society choose their own representatives; thus, it cannot be said that whatever public finance system they choose can be against the wishes or best interests of their constituency. Their underlying premise is that there is a social contract between the government and the people.
The social contract theory has been discussed in various forms over the centuries (Hobbes, 1651; Locke, 1689; Rousseau, 1762). The argument has been applied to public finance, although scholars have debated some of the specifics. Spooner (1870) denied the existence of any social contract and argued that even if there was a social contract at some point in history, that contract is not binding on future generations because no individual or group of individuals can sign a contract that binds those who are not a party to it.
Another view is that the public finance system a democratically elected government adopts can be justified on moral grounds within certain limits, but there are constitutional limits to what any such government can do in the name of the people. Buchanan (1967) and other members of the Public Choice School of Economics (Buchanan & Flowers, 1975; Cullis & Jones, 1998) subscribe to this view. Buchanan and Musgrave (2001) debated their two approaches in a series of published lectures.
Walter Block conducted two studies examining the public finance literature in an unsuccessful attempt to find any justification for taxation. Perhaps the reason for his failure to find justification is because public finance scholars begin their analyses with the underlying premise that taxation is justified. They simply do not address the issue because of their belief that such questions are outside the field of public finance. Perhaps they are correct. Such issues might be more appropriate for political philosophers to discuss (Nozick, 1974).
The present study focuses specifically on tax evasion, a subtopic within the field of public finance that is seldom discussed other than in passing. When it is discussed, the focus of the discussion is usually technical aspects of the topic. This study examines the attitudes of people in the Netherlands. The data used in this study was gathered by a group of social scientists who worked in conjunction with the World Values surveys, which has been gathering information about attitudes on a wide range of social science issues since the early 1980s.
This study breaks new ground in several ways. Most prior research into taxpayer attitudes on tax evasion has used a United States database, mostly because the U.S. Internal Revenue Service has published data on a regular basis and distributed it to scholars for analysis (Bloomquist, 2003a&b; Internal Revenue Service, 1978, 1983). It has only been in recent years that non-U.S. studies have been done on this subfield to any great extent. The present study reviews some of this international literature.
But it does more than that. It also examines some demographic variable that other international studies have not looked at and focuses on the Netherlands, a country where not much research has been done on taxpayer opinions regarding tax evasion.
REVIEW OF THE LITERATURE
Tax evasion has been in existence ever since the first rulers imposed taxes on their subjects (Adams, 1982, 1993; Webber & Wildavsky, 1986). People have been complaining about taxes since then as well.
Modern versions of complaints have taken several avenues. Some authors have discussed tax revolts (Baldwin, 1967; Beito, 1989; Laffer & Seymour, 1979; Larson, 1973; Rabushka & Ryan, 1982; Valentine, 2005) or revolutions (Edwards & Mitchell, 2008), while other merely talk about tax reform (Hall & Rabushka, 1985; Laffer & Seymour, 1979; Schlaes, 1999), perhaps by replacing the income tax with some sort of fairer tax system (Boortz & Linder, 2005; Champagne, 1994; Chodorov, 1954), such as the flat tax (Hall & Rabushka, 1985) or a consumption tax (Hultberg, 1996).
Another group of authors complain about the rich not paying their fair share (Cowell, 1990; Johnston, 2003, 2007; Lewis & Allison, 2002; Thorndike & Ventry, 2002) while other scholars argue that the rich are being exploited unfairly or are paying more than their fair share (Graetz & Shapiro, 2005; McGee, 1994, 1998a, 1999b, 2004, 2012). A classic study by Blum and Kalven (1953) argued that the graduated income tax is counterproductive on utilitarian grounds, which was an attempt by economists to apply utilitarian ethical theory to public finance.
Some scholars have tried to justify the tax system as the price we pay for civilization, the underlying assumption being that there is a duty to pay taxes and that any attempt to evade taxes is an attack on civilization itself (Greenwood, 2007; Holmes & Sunstein, 1999). Other scholars have challenged the legitimacy of taxes or the tax system (Block, 1989, 1993; Curry, 1982; Martinez, 1994; Nozick, 1974; Sabrin, 1995)
A few scholars have advocated abolishing the income tax and replacing it with a totally voluntary system (Curry, 1982; Sabrin, 1995). Shughart (1997) and McGee (2001) criticized the tax system for engaging in social engineering (using the tax system to encourage or discourage certain behavior) rather than revenue collecting. Members of Congress (DioGuardi, 1992; Hansen, 1984) and others (Burnham, Frankel & Fink, 1985) have warned about IRS abuses, while others expose the current waste in the system (Fitzgerald & Lipson, 1984; Grace, 1984; Gross, 1995; Payne, 1993). Myddelton (1994) discussed the power to tax as the power to destroy from a British perspective. The practitioner literature ignores all of these arguments and focuses on technical issues (Armstrong & Robison, 1998; Oliva, 1998).
Some studies have focused on philosophical aspects of tax evasion. Leiker (1998) discussed Rousseau's views on tax evasion. Morales (1998) discussed the view that it is sometimes more important to feed the family than to pay taxes. McGee (2006a) discussed the three basic views that Crowe (1944) identified in an earlier work [Tax evasion is never ethical, sometimes ethical or always ethical] and expanded on those possibilities by adding a fourth view [There is sometimes an affirmative duty to evade taxes (McGee, 2012)]. Torgler (2003a) wrote a dissertation that examined both theoretical and empirical aspects of tax evasion and also asked the question whether to evade or not (Torgler, 2003d). He also published a book that addressed both empirical and theoretical aspects of tax evasion (Torgler, 2007a).
McGee (1994, 1998c, 2004, 2012) and Martinez (1994) asked the basic question, "When is tax evasion unethical?" Questions have been raised about the ethics of evading specific taxes, such as tariffs (McGee, 1999c), the Social Security tax (McGee, 1999e), the capital gains tax (McGee, 1999f), the estate tax (McGee, 1999g), or whether it is ethical to evade taxes in an evil or corrupt state (McGee, 1999a).
Some studies focusing on tax evasion have examined cultural (Alm & Torgler, 2004, 2004; Cullis, Jones & Lewis, 2010; Cummings, Martinez-Vazquez, McGee & Torgler, 2004; Lewis, Carrera & Jones, 2009; Su, 2006; Torgler, 2003c; Torgler & Schneider, 2007), psychological (Alm & Torgler, 2004; Alm, Martinez-Vazquez & Torgler, 2010; Frey & Torgler, 2007; Groenland & van Veldhoven, 1983; Kirchler, 2007; Kirchler, Muehlbacher, Kastlunger & Wahl, 2010; Wallschutzky, 1984) or religious (Cohn, 1998; Crowe, 1944; DeMoville, 1998; Gronbacher, 1998; Jalili, 2012; McGee, 1998a,b,d,e&f; 1999a, 2004, 2008a, 2012; Murtuza & Ghazanfar, 1998; Pennock, 1998; Smith & Kimball, 1998; Tamari, 1998; Torgler, 2006a) aspects of the issue. Space does not permit a full discussion of all of these perspectives, although some discussion related to the empirical studies that have been conducted will be included below.
The religious literature has addressed the issue of tax evasion and the perspectives are diverse. Perhaps the most comprehensive analysis of tax evasion from a religious perspective was done by Crowe (1944), a Catholic priest who examined 500 years of Catholic literature on the subject, much of which was in the Latin language. He can be credited with introducing the English-speaking public to this literature.
The Catholic view on tax evasion is far from uniform. In fact, it is probably the most diverse of the various religious views. Some Catholic scholars view tax evasion as always unethical and even a mortal sin, while others regard it as a mere infraction against the state with hardly any moral issues. Sometimes the ethics of evasion have to do with the purpose, such as the ability to pay, paying to fund an unjust war or supporting a corrupt government.
Gronbacher (1998) examined the ethics of tax evasion from the perspective of Catholic social thought and classical liberalism, a view that sees the functions of the state as limited and evasion as justifiable if the state goes beyond its legitimate functions and into the realm of redistribution. Pennock (1998) discusses the ethics of evading taxes to cut off funding for an unjust war. Schansberg (1998) examines tax evasion from the perspective of Biblical Christianity, with emphasis on the view that we should render unto Caesar what is Caesar's and to God what is God's, although he does not identify quite what the state is entitled to.
Of the various Christian sects, the group most opposed to tax evasion is the Church of Jesus Christ of Latter-Day Saints (Mormon). The literature of this religion strictly prohibits tax evasion without exception (Smith & Kimball, 1998), presumably even in cases where Hitler is the tax collector. An empirical study of Mormon student opinion, however, found that actual practitioners of the faith, while being strongly opposed to tax evasion in general, are not totally opposed in all cases, especially where the government engages in human rights abuses (McGee & Smith, 2009).
A few scholars have addressed the ethics of tax evasion citing Muslim sources. Murtuza and Ghazanfar (1998) discussed zakat, the Muslim duty to take care of the poor, although they did not address the issue of tax evasion directly.
Yusuf (1971) wrote a book on Economic Justice in Islam that devoted some space to Muslim views on tax evasion. According to Yusuf, there is no duty to pay taxes assessed on income or taxes that cause prices to rise, which would include sales and use taxes, excise taxes and tariffs. There is also no duty to pay estate or inheritance taxes. Ahmad (1995) wrote a book on Business Ethics in Islam that took the same position, citing Yusuf (1971) as a source.
McGee (1997, 1998a, d&e, 1999a) cited these two Muslim scholars in several places, which led another Muslim scholar (Jalili, 2012) to write a book chapter disputing their views and offering an alternative Muslim position. According to Jalili, Muslims have an absolute duty to pay any and all taxes to a purely Islamic state, meaning one that follows the Sharia law. In cases where the state is not purely Muslim or is secular, the duty to pay is less than absolute.
The literature of the Baha'i faith is almost as strongly opposed to tax evasion as that of the Mormons (DeMoville, 1998). Their literature would justify evasion only in cases where members of the Baha'i faith are persecuted by the government. The literature specifically addresses the issue of Hitler as tax collector and takes the position that even Hitler is entitled to be paid, unless he persecutes members of the Baha'i faith. The issue of persecution of members of other faiths was not examined, although in fairness it should be mentioned that the literature that addressed the Hitler question was published before it because widely known that Hitler intended on targeted the Jews for extermination.
The Jewish literature is also strongly opposed to tax evasion in general, although exceptions are made where the government is corrupt or oppressive (Cohn, 1998; McGee, 1998a,f, 1999a; Tamari, 1998). The Jewish literature is strongly against tax evasion for several reasons. One reason is the belief that "the law is the law," meaning that one must always obey the law no matter what the law is. Martin Luther King, Gandhi and other rights activists would challenge this view.
Another reason is because God commands us to pay taxes, a view that might be challenged by atheists and others who are not so sure that God would never support tax evasion. A third reason to prohibit tax evasion is because of a duty to the Jewish community not to do anything that would disparage another Jew. If one Jew evades taxes, it makes all Jews look bad; therefore, Jews must not evade taxes. This position could also be challenged, especially where Hitler is the tax collector.
A fourth reason why the Jewish literature forbids tax evasion is because Jews have a duty to perform good works (mitzvos), which they might not be able to do if they go to jail for tax evasion. One might challenge this position by pointing out that there may be multiple opportunities to perform good works in prison.
The issue of paying taxes to Hitler has been raised in a number of studies. In a study soliciting the opinions of Orthodox Jewish students (McGee & Cohn, 2008), one of the questions asked was whether it would be unethical for a Jew living in Nazi Germany to pay taxes to Hitler. Of the 18 arguments that have been used historically to justify tax evasion on ethical grounds, this argument garnered the most support, although the Orthodox Jewish students did believe that there is some duty to pay taxes even to Hitler, for the reasons mentioned above.
Similar surveys to other student groups in Argentina (McGee & Ross, 2008), Armenia (McGee & Maranjyan, 2006, 2008), Australia (Gupta & McGee, 2010b; McGee & Bose, 2009b), Bosnia (McGee, Basic & Tyler, 2008, 2009), Colombia (McGee, Lopez & Yepes, 2009), Estonia (McGee, Alver & Alver, 2008), France (McGee & M'Zali, 2009), Germany (McGee, Benk, Ross & Kilicaslan, 2009; McGee, Nickerson & Fees, 2006, 2009), Guatemala (McGee & Lingle, 2008), Kazakhstan (McGee & Preobragenskaya, 2008), Latin America (McGee & Lopez, 2008), Mali (McGee & M'Zali, 2008), New Zealand (Gupta & McGee, 2010a), Poland (McGee & Bernal, 2006), Puerto Rico (McGee & Lopez, 2007), Romania (McGee, 2006c; McGee, Basic & Tyler, 2008), Slovakia (McGee & Tusan, 2008), Thailand (McGee, 2008e), Turkey (McGee & Benk, 2011) and Ukraine (Nasadyuk & McGee, 2006, 2008), as well as international business academics teaching in the United States (McGee, 2006b) and Turkish tax practitioners (McGee, Benk, Yildirim & Kayikci, 2011), also rated the paying taxes to Hitler as high on the list of arguments to justify tax evasion, although this argument was not always at the top of the list in terms of justifiability.
The ranking of the argument about Jews paying taxes to Hitler on the list of 18 arguments tended to be culture or geographic specific. European and North American surveys tended to rank this argument higher on the list than surveys in Latin America, Asia, Africa, Australia and New Zealand. That argument was not included in surveys conducted in China (McGee & An, 2008; McGee & Guo, 2007; McGee & Noronha, 2008), Hong Kong (McGee & Butt, 2008; McGee, Ho & Li, 2008), Macau (McGee, Noronha & Tyler, 2007; McGee & Noronha, 2008) and Taiwan (McGee & Andres, 2009) in order not to get one of the co-authors in trouble for discussing a human rights issue.
In recent years a few other studies focusing on the ethics of tax evasion have been conducted using non-US data. Examples include, Armenia (McGee, 1999d, 2000), Asia (McGee, 2007, 2008b; Torgler, 2004b), Australia (McGee & Bose, 2009a), Austria (Torgler & Schneider, 2005) , Bulgaria (Pashev, 2008a&b; Smatrakalev, 1998), Costa Rica (Torgler, 2003e), developing countries (Bird, Martinez-Vazquez & Torgler (2004), Europe (Alm & Torgler, 2006), Greece (Ballas & Tsoukas, 1998), India (Torgler, 2006b), Latin America (McGee & Gelman, 2009; Torgler, 2005), Moldova (McGee, 2009), New Zealand (Hasseldine, Kaplan & Fuller, 1994; McGee & Bose, 2009a), Romania (McGee, 2009), Russia (Alm, Martinez-Vazquez & Torgler, 2005, 2006; Vaguine, 1998; Vogel, 1974), Spain (Martinez-Vazquez & Torgler, 2009), Sweden (Nylen, 1998; McGee, 1998g), Switzerland (Torgler, 2004a, 2007b; Torgler & Schaltegger, 2006) , Thailand (McGee, 2006d, 2008) thirty-three countries (McGee & Tyler, 2007), transition economies (McGee & Gelman, 2008; Torgler, 2003b), Turkey (Benk, McGee & Ross, 2009; McGee & Benk, 2011) and Vietnam (McGee, 2006d, 2008f). Jackson and Milliron (1986) summarized the results of some pre-1986 studies, mostly of U.S. sample populations but also including some non-US data.
A study has also been made examining trends in tax evasion for 10 transition countries (McGee, 2008c). Another study examined tax misery and tax ethics in Korea, Japan and China (McGee, 2008d).
Some of the studies listed above examined demographic variables such as gender, age, education level, and so forth. Some of those studies found that women are more opposed to tax evasion than men. Other studies found no statistical difference between male and female views. A third group of studies found men to be …