Tax morale and institutional theory: a systematic review

Abstract

Purpose The purpose of this paper is to conduct a systematic review of the factors that shape tax morale. A large range of random explanatory variables identified in the literature as determinants of tax morale are synthesised and structured by drawing inspiration from the institutional theory. Design/methodology/approach To do this, a systematic search has been conducted using a library catalogue which provides access to more than 400 databases. Findings The finding is that the institutional theory provides a suitable theoretical basis to explore tax morale. Indeed, all the factors until now identified as determinants of tax morale (except the control variables/socio-demographic characteristics) can be categorised either as belonging to formal institutions or to informal institutions. The most salient factor is trust, with both vertical and horizontal trust positively related to tax morale. Research limitations/implications The outcome is a call for a more nuanced understanding of not only the effect of formal and informal institutions on tax morale but also how formal and informal institutions interact and alter each other and, consequently, affect tax morale. Practical implications The paper seeks to encourage governments to start recognising that as low tax morale arises when a gap exists between formal and informal institutions, they need to design policy measures aimed to reduce this gap, rather than persisting with deterrence measures. Originality/value This is the first systematic review of the factors that influence tax morale using an institutionalist lens.