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Journal Article•DOI•

Is deterrence approach effective in combating tax evasion? A meta-analysis

Muh Dularif1, Sutrisno T1, Nurkholis1, Erwin Saraswati1•
University of Brawijaya1
25 Apr 2019-Problems and perspectives in management (Muh Dularif, Sutrisno T., Nurkholis, Erwin Saraswati)-Vol. 17, Iss: 2, pp 93-113
TL;DR: In this article, the authors presented the results of a meta-analysis of the relationship between determinant factors and tax evasion based on a deterrence approach, which showed that only tax rate has a significant impact on tax evasion.
Abstract: The purpose of this paper is to present the results of a meta-analysis of the relationship between determinant factors and tax evasion based on deterrence approach. Using the meta-analysis method, each statistical result of empirical studies is converted into r-pearson as standardized effect size, and then synthesized into a mean effect size in order to increase power and to resolve uncertainty. Theoretically, increasing audit, tax rate and tax penalty will decrease tax evasion. However, the results show that only tax rate has a significant impact on tax evasion. Synthesizing totally 478 outcomes from articles published between 1978 and 2018, there is a robust conclusion that decreasing tax rate is an effective tool in combating tax evasion. On the other hand, audit and penalty are not significant in influencing tax evasion. In addition, the results of heterogeneity analysis suggest that national culture and income level of the country are useful in explaining the impact of audit, tax rate and tax penalty on tax evasion. These findings should be of interest to policymakers. First, instead of sacrificing more resources in conducting audit or imposing more penalty, tax authorities should consider setting the tax rate as low as possible to diminish tax evasion. Second, considering that culture and income level influence the impact of audit and penalty on tax evasion, policymakers should consider national cultural values and income level condition when designing audit techniques and setting penalty structures.

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Citations
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Journal Article•DOI•
Tax evasion and service-trust paradigm: A meta-analysis

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Nurkholis Nurkholis1, Muh Dularif1, Ni Wayan Rustiarini, Collins G. Ntim2•
University of Brawijaya1, University of Southampton2
05 Oct 2020-Cogent Business & Management
TL;DR: In this article, the authors present the results of meta-analysis on the relationship between the determinant factors against tax evasion based on service and trust paradigm and show that tax evasion can be prevented based on trust and service.
Abstract: The purpose of this research is to present the results of meta-analysis on the relationship between the determinant factors against tax evasion based on service and trust paradigm. This research sy...

15 citations

Cites background from "Is deterrence approach effective in..."

  • ...The research in the area of tax evasion was initially dominated by the enforcement paradigm, a lawbased approach creating a deterrence effect on the taxpayers (Dularif et al., 2019)....

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Journal Article•DOI•
Does trust in zakat institution enhance entrepreneurs’ zakat compliance?

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Saeed Awadh Bin-Nashwan, Hijattulah Abdul-Jabbar, Saliza Abdul Aziz
27 Jul 2021-Journal of Islamic Accounting and Business Research
TL;DR: In this paper, the role of trust in zakat institution through the relationship between socio-economic determinants (i.e., religiosity, moral reasoning, peer influence and system fairness) and zat compliance decisions was examined.
Abstract: Although zakat is a principal way to redistribute wealth, a unique practice designed to achieve a sustainable Islamic economic and social system, zakat institutions and agencies in most Muslim countries still suffer from the perplexing issue of low zakat collections, ascribing this to the level of compliance among zakat payers. To provide more insight into this lacuna, this study aims to examine the role of trust in zakat institution through the relationship between socio-economic determinants (i.e. religiosity, moral reasoning, peer influence and system fairness) and zakat compliance decisions.,From a typical Islamic country, Yemen, a random sample of 274 entrepreneurs was drawn for a self-administered survey. To estimate and analyze the compliance model, SmartPLS structural equation modeling was used.,The results show that all hypothesized direct relationships are supported. Importantly, the trust-moderated interactions of religiosity, moral reasoning and peer influence on zakat compliance are significant, although its interaction with zakat system fairness is not.,The results should be helpful for policymakers and responsible institutions in Muslim communities to understand how different levels of trust can play an important role in Zakat payers’ compliance to boost or erode zakat funds. This research also contributes important inferences for managers about the necessity of inculcating religious and moral values among zakat payers, formulating a fair system and embarking on sensitization programs in society.,The research enriches the scanty literature by validating a viable compliance model drawing on the socio-economic theory of regulatory compliance. Moreover, the model integrates the moderating role of trust in socio-economic perspectives of zakat compliance.

14 citations

Journal Article•DOI•
National culture as a moderator between social norms, religiosity, and tax evasion: Meta-analysis study

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Sutrisno T1, Muh Dularif2•
University of Brawijaya1, University of Southampton2
16 Jun 2020-Cogent Business & Management
TL;DR: In this article, the authors present the meta-analysis results of the relationship of social norms and religiosity with tax evasion, with national culture as a moderating variable, with the objective of presenting the meta analysis results of tax evasion.
Abstract: The objective of this research is to present the meta-analysis results of the relationship of social norms and religiosity with tax evasion, with national culture as a moderating variable. Previous...

10 citations

Cites background from "Is deterrence approach effective in..."

  • ...National culture may also encourage or inhibit tax avoidance or tax evasion behavior, regardless of individual taxpayer’s characteristics or other institutional components (BameAldred et al., 2013; Dularif et al., 2019)....

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Journal Article•DOI•
Re-theorising participation in undeclared work in the European Union: lessons from a 2019 Eurobarometer survey

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Colin C. Williams1, Gamze Oz-Yalaman2•
University of Sheffield1, Eskişehir Osmangazi University2
16 Feb 2021-European Societies
TL;DR: In this article, the dominant theorisation views workers as rational economic actors participating in undeclared work when the benefits exceed the expected benefits, i.e., when the expected benefit exceeds the expected expenditure.
Abstract: When explaining participation in undeclared work, the dominant theorisation views undeclared workers as rational economic actors participating in undeclared work when the benefits exceed the expect...

8 citations

Cites background from "Is deterrence approach effective in..."

  • ...However, other studies find that increasing detection and punishments has no effect (Dularif et al. 2019; Hartl et al. 2015; Williams and Franic 2016) and yet others that it results in more undeclared work due to the resultant breakdown of the social contract between citizens and the state (Chang…...

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Journal Article•DOI•
Explaining the informal economy in Western Europe: beyond a rational economic actor perspective

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Colin C. Williams, Gamze Oz-Yalaman
25 Sep 2020-Journal of Economic Studies
TL;DR: In this paper, the authors evaluated the effect of vertical and horizontal trust on the likelihood of participating in the informal economy in seven West European countries (Austria, Belgium, France, Germany, Ireland, Luxembourg, the Netherlands and the United Kingdom).
Abstract: The dominant theorisation of the informal economy views participants as rational economic actors operating in the informal economy when the expected benefits exceed the perceived costs of being caught and punished. Recently, an alternative theory has emerged which views participants as social actors operating in the informal economy due to their lack of vertical trust (in governments) and horizontal trust (in others). The aim of this paper is to evaluate these competing theorisations.,To do so, data are reported from special Eurobarometer surveys conducted in 2007, 2013 and 2019 in eight West European countries (Austria, Belgium, France, Germany, Ireland, Luxembourg, the Netherlands and the United Kingdom).,Using probit regression analysis, the finding is that increasing the expected likelihood of being caught and level of punishment had a weak significant impact on the likelihood of participating in the informal economy in 2007, and there was no significant impact in 2013 and 2019. However, greater vertical and horizontal trust is significantly associated with a lower level of participation in the informal economy in all three time periods.,The outcome is a call for a policy to shift away from increasing the expected level of punishment and likelihood of being caught, and towards improving vertical and horizontal trust. How this can be achieved is explored.,Evidence is provided in a Western European context to support a shift away from a rational economic actor to a social actor approach when explaining and tackling the informal economy.

7 citations

Cites background from "Is deterrence approach effective in..."

  • ...However, others reveal that increasing the probability of being caught and penalties has no effect on participation (Dularif et al., 2019; Hartl et al., 2015) and yet others that i leads to higher participation due to the breakdown in the social contract between the state and its citizens (Kirchler…...

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References
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Journal Article•DOI•
Prospect theory: analysis of decision under risk

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Daniel Kahneman, Amos Tversky
01 Jan 1979-Econometrica

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"Is deterrence approach effective in..." refers background or result in this paper

  • ...To overcome this puzzle, Dhami and Al-Nowaihi (2007) offered prospect theory (Kahneman & Tversky, 1979) to explain the impact of tax rate changes on tax compliance behavior....

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  • ...The result of this study related to the role of lowering tax rate in decreasing tax evasion give additional support to prospect theory (Kahneman & Tversky, 1979), Dhami and Al-Nowaihi (2007) and Lewandowski (2017)....

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  • ...Reviewing 86 individual studies published between 1978 and 2018 that consist of 478 findings, this study shows that in general the direction of the influence of deterrent factors is consistent with the prediction of Allingham and Sandmo (1972) and prospect theory (Kahneman & Tversky, 1979)....

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  • ...To answer the puzzle, Dhami and Al-Nowaihi (2007) proposed prospect theory (Kahneman & Tversky, 1979) to predict the impact of tax rate....

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John E. Hunter1, Frank L. Schmidt•
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Journal Article•DOI•
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Michael G. Allingham1, Michael G. Allingham2, Agnar Sandmo1, Agnar Sandmo2•
University of Pennsylvania1, Norwegian School of Economics2
01 Nov 1972-Journal of Public Economics
TL;DR: In this paper, an analysis of the individual taxpayer's decision on whether and to what extent to avoid taxes by deliberate underreporting is presented, based on a simple static model where this decision is the only one with which the individual is concerned, so that we ignore the interrelationships that probably exist with other types of economic choices.

4,106 citations

"Is deterrence approach effective in..." refers background or methods or result in this paper

  • ...Developing economic model of tax compliance process in a logical manner using economic model, popular with EUT-AS model, Allingham and Sandmo (1972) encourage other researches not only to prove the accuracy of the model....

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  • ...As predicted by EUT, increasing audit probability and penalty will decrease tax evasion (Allingham & Sandmo, 1972)....

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  • ...The influence of Allingham and Sandmo (1972) on tax compliance researches is supported by the use of the theory....

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  • ...To be included in this study, papers must have the following three criteria: (1) papers used tax evasion as the focus of study, (2) papers examined minimally one of three determinants, (3) papers should be quantitative or based on empirical data, (4) papers should consist of sufficient statistical data that can be converted into r-pearson....

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  • ...Reviewing 86 individual studies published between 1978 and 2018 that consist of 478 findings, this study shows that in general the direction of the influence of deterrent factors is consistent with the prediction of Allingham and Sandmo (1972) and prospect theory (Kahneman & Tversky, 1979)....

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Cultures and Organizations: Software of the Mind, 3rd ed.

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Geert Hofstede, G.J. Hofstede, M. Minkov, McGraw-Hill New
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2,592 citations

"Is deterrence approach effective in..." refers background in this paper

  • ...People in a high individualism country tend to focus on personal interest (Hofstede et al., 2010)....

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  • ...Moderator variables Citizens in high power distance countries tend to rely heavily upon the authorities (Hofstede et al., 2010)....

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Cultures and Organizations, Software of the mind. Intercultural Cooperation and Its Importance for survival

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Geert Hofstede, Gert Jan Hofstede, Michael Minkov
01 Jan 2010
TL;DR: In this paper, the differences in the way strategists and their followers think, offering practical solutions for those in business to help solve conflict between different groups, but at the same time they are exposed to common problems which demand co-operation for the solution of these problems.
Abstract: Despite calls for better co-operation between countries and different cultures, there is still confrontation between people, groups and nations. But at the same time they are exposed to common problems which demand co-operation for the solution of these problems. This book helps to understand the differences in the way strategists and their followers think, offering practical solutions for those in business to help solve conflict between different groups.

2,505 citations

Trending Questions (1)
How can governments implement policies to combat tax evasion?

The paper suggests that instead of increasing audit or penalty, governments should consider setting the tax rate as low as possible to combat tax evasion. Additionally, policymakers should take into account national cultural values and income levels when designing audit techniques and setting penalty structures.

See answers from 4 other papers