Effect of Government Efficiency on Tax Evasion: The Mediating Role of Ethics and Control of Corruption

Drawing on institutional theory, this study tests the effect of government efficiency on tax evasion by considering the mediating role of ethics and control of corruption. The different sources of variables forced us to choose a common time period from 2010 to 2015 as well as a common list of 138 countries in the sample. The results indicated that government efficiency and ethics and control of corruption separately are influential in reducing tax evasion. Furthermore, government efficiency is a significant predictor of ethics and control of corruption. The final step of analyses proved the existence of a full mediation effect of ethics and control of corruption between government efficiency and tax evasion. In other words, ethics and control of corruption is a mechanism through which government efficiency reduces tax evasion. The study suggests regulatory and practical implications that are largely for the public sector, administrators, and politicians.