Why do we justify tax evasion? Empirical evidence from a Factorial Survey in Spain

For funding public goods, states are forced to collect taxes that reduce one`s in- come. Accordingly, taxes represent a burden, which rational individuals attempt to reduce. The standard economic model tries to explain tax evasion by taxpayer's income, tax rates, risk of detection, and severity of penalties. To resolve the puzzle why observed tax compliance is much higher than predicted by this model, literature distinguishes between coercive compliance (standard economic model) and voluntary compliance (legitimacy-based model). The aim of this article is to analyse, for the first time, tax morality via a factorial survey experiment (vignette analysis) conducted 2017 among Spanish citizens. An advantage of using a factorial survey is that it allows testing simultaneously both, the impact of situational factors described in vignettes as well as of respondent characteristics on the justifiability of tax evasion. Potentially relevant personal factors were derived from Inglehart's modernisation theory and from theories about morality and moral change. Among our situational factors, gross household income and a country's level of corruption had the strongest impact on the justifiability of tax evasion. At the respondent level, multilevel analysis confirmed that older age cohorts, higher educated people, and respondents believing in basic moral principles significantly less justi- fied tax evasion. Hence, our study confirmed that tax compliance goes beyond the mere calculation of personal material gain and loss. A practical implication is that the state should make increasing effort to exercise transparency and effectively convey citizens that the use of taxes is fair, equitable and free of corruption.