Life satisfaction and tax morale: The role of trust in government and cultural orientation

Abstract

Taxes are essential for a government to function correctly, because they fund public services and promote long-term growth in a country. Tax morale is a positive attitude toward taxation shaped by extrinsic and intrinsic motivations, including numerous psychological factors. However, these factors are far from completely clear and a better understanding of what drives tax morale can greatly help governments in the design of tax policies and their administration. In this paper we test the novel hypothesis that life satisfaction is one of the psychological aspects affecting tax morale. Using longitudinal data from the World Value Survey, we show that people more satisfied with their own life show higher tax morale. We also provide evidence on the roles played by confidence in government and people's cultural orientation in shaping the relationship between life satisfaction and tax morale. Our findings support the idea that implementing alternative policies that, directly or indirectly, increase tax morale could be politically relevant for helping governments mobilize adequate resources from taxation, given that tax evasion prosecution is far from perfect.