An Assessment of Tax Morale Among Mauritian Taxpayers: Full Length Research Paper
An Assessment of Tax Morale Among Mauritian Taxpayers: Full Length Research Paper
An Assessment of Tax Morale Among Mauritian Taxpayers: Full Length Research Paper
Department of Accounting and Finance, Faculty of Law and Management, University of Mauritius, Rduit, Mauritius.
Received 11 June, 2016; Accepted 19 August, 2016
Taxation has gained considerable attention in the past few year and lot of studies have be en done on
tax evasion and tax compliance. This study assesses the level of tax and identifies factors that shape
tax morale in Mauritius. A self-developed questionnaire was distributed to 250 randomly respondents
and a logistic regression analysis was use d to analyse data collected. A high degree of tax morale is
required to achieve high level of tax compliance. The result shows that socio -demographic and socio
economic factors have an impact on tax morale and it can be seen that social norm, fairness and equity,
trust in government and in tax authority are determinants that shape tax morale. The findings are in line
with that some authors who found out that that there is a positive correlation between inequity and tax
evasion. The study recommended that population should be educated, tax system should be simplified,
government should be fair and tax authority should respect the population.
Key words: Tax evasion, logit model, cross sectional regression, tax morale.
INTRODUCTION
In the 1990s, the concept of tax morale has started to people do not cheat.
attract attention of researchers. Researchers have tried In some countries, the level of detection and penalty is
to analyse why lots of people pay their taxes, despite the so low that taxpayers would evade tax if they were
fact that fines and probability of audit are low. A special rational but they still comply with paying their taxes. Many
survey has shown that based on the expected utility authors have argued that tax morale has been a
concept, traditional theories predict a lesser tax motivating factor for taxpayers to pay taxes and has also
compliance. Based on such finding, new research has contributed to a high degree of tax compliance. Erard and
been conducted to find new factors that influence tax Feinstein (1994) have integrated moral sentiments into
morale. The first finding on tax morale was by German the rational model to explain the actual behaviour of
scholars centred on Gunter Schmolders. These authors taxpayers. Furthermore, Andreoni et al. (1998) pointed
claimed that the traditional point of view of analysing tax out that implementing moral and social dynamic to the
is biased. The question about tax morale is rather why traditional model is largely an undeveloped area of
Authors agree that this article remain permanently open access under the terms of the Creativ e Commons Attribution
License 4.0 International License
2 J. Account. Taxation
evasion and perceived inequalities in tax system and they an increase in individuals perception that tax evasion is
found that there is a positive correlation between inequity unjustifiable. Thus, trust in legal system and the
and tax evasion. Taxpayers will see tax evasion as a re- satisfaction of the efficiency of tax administration has
establishment of fairness, if the terms of trade between increased tax morale.
the state and the taxpayers are not fair. Spicer and Spain has significantly lower tax morale than in the
Lundtstedt (1976) argued that taxpayers will feel cheated Unites States. Trust in the government and parliaments
if they feel that the tax revenues is not spent well. Smith have an effect on tax morale. Moreover, socio- economic
(1992) and Stalams (1991) indicated that positive actions factors can also influence tax morale.
and appropriate use of tax revenues will raise tax morale
as those positive actions will encourage taxpayers to
have a positive attitudes and commitment toward tax METHODOL OGY
system. Findings stated that there is a positive
The technique used for collecting the data w as a self -developed
relationship between trust and tax morale. More trust in
questionnaire, containing items of diverse formats: multiple choice,
the state, tax authority and legal system will enhance tax dichotomous answ ers like Yes and No, self -assessment items
morale. Empirical evidences stated that there is a positive measured on the 5-point Likert scale, and open-ended questions.
relationship between perceived public spending and tax Respondents w ere chosen through the quota sampling method
morale. Thibaut et al. (1974) concluded that tax w ith regards to specific level of education, that is, those having at
compliance will be high if taxes are paid back in the form least secondary qualification. Moreover, sampling frame w as
divided into non-overlapping strata for example ethnicity, age,
of public services. Frey and Feld (2002) argued that tax gender and employment w hich is named as stratified sampling
morale will be higher, if tax officer treat taxpayers with technique. This technique helps to categorize the respondents
respect. Alm and Torgler (2006) found that tax morale will faster as w ell as having approximately an equal number of
increase if taxpayers are treated with respect by the tax individuals from each group. Also, this method allow s each unit of
authority the population to have equal chance of being chosen and in
addition due to time and monetary constraints.
Institutions such as federalism and direct democracy
A sample size of 300 respondents w as deemed to be sufficient
can have an impact on tax morale. Empirical findings for the survey due to time constraints. How ever, only 250 results
showed that institutional factors increased tax morale. w ere collected w hich represents approximately 93% response rate.
Feld and Frey (2002b) analysed how tax officers treat The sampling population for this research is composed of
taxpayers in Switzerland, and found that taxpayer in Mauritians adults that are aged 18 years old or elder. The
areas with more direct participation rights have a higher questionnaire w as circulated to individuals having different age
groups and diverse professional backgrounds. This study used
tax morale as tax authorities are more respectfully and cross-sectional survey design. Reliability test is use to know
less suspicious about underreporting income compared w hether our survey on the analysis of tax morale is reliable or not.
to areas with less direct democracy. As show n in Table 1, the Cronbach alpha coefficient of 0.775 is
greater than 0.7, therefore w e can say that survey questionnaire is
reliable and that further analysis can be conducted. Statistical
Package for the Social Sciences (SPSS 16.0) for w indow s and
Analysis of tax morale in different countries
Stata w as used to analyse collected data. Tables, bar charts and
pie w as used to illustrate the results.
East and West Germany was used to analyse the effect
of different cultures and social norms on tax morale. In
East Germany, the age group from 65 and above had the DATA ANALYSIS
highest tax morale. Thus, this supports the assumption
that elder people have a higher tax morale than younger Data preliminary
people. In both East and West Germany, education had a
negative impact on tax morale. Females were less than Table 2 shows the descriptive (mean, median. mode and
males. In East Germany, singles individual had lower tax standard deviations). At a mean value of 2.79,
morale than married people compared to West Germany participants see tax evasion as unjustifiable.
and in East Germany, only self-employers had lower tax Furthermore, respondents seen to agree with the
morale than full time employees. statements that tax evasion is unethical even if everyone
Asia has different cultures such as Hinduism, Islam and does it or if the probability of getting is low or if tax
Buddhism. Religion can have an impact on tax morale. revenue is not spent on projects that does not benefit
Furnham (1981) found in an empirical analysis that a them with mean score of 2.94, 2.78 and 2.51
higher degree of protestant work ethic leads to more respectively.
opposition to taxation. In India, Muslims and people with Table 3 shows the descriptive (mean, median. Mode
religion reports have generated higher tax morale than and standard deviations) for deterrence factors. On 4
Hindus and people without religion has shown a Likert scale, the mean value for all variables are more
significant reduction in tax morale. In japan, they found than half of the point scale (that is, 2). Most respondents
that an increase in the level of satisfaction has resulted in said that the fear of sanction, low tax rate and paying a
4 J. Account. Taxation
Reliability statistics
Cases Number Cronbachs alpha No. of items
Valid 201 0.775 26
Statistics
Statements Mean Median Mode Std. deviation
Tax evasion is unjustifiable 2.79 3.00 3 1.000
Tax evasion is unethical even if the probability of getting caught is low 2.94 3.00 3 0.906
Tax evasion is unethical even if everyone does it 2.78 3.00 3 1.011
Tax evasion is unethical even if tax revenue is spent on projects that does not
2.51 3.00 3 0.980
benefit you
Tax evaders being audited in more detail will decrease tax evasion 2.96 3.00 3 0.848
Statistics
Statement Mean Median Mode Std. deviation
Fear of sanction 2.79 3.00 3 0.871
Low tax rate 2.78 3.00 3 0.855
Paying a relatively small fine 2.65 3.00 2 0.872
relatively small fine are factors that highly motivate them 0.01, therefore we accept H1. It can be observed that
to pay their tax with mean score of 2.79, 2.78 and 2.65 there is a positive correlation, that is an increase in the
respectively. perception that tax evasion is unjustifiable will result to an
Table 4 shows the descriptive (mean, median. mode increase in tax morale.
and standard deviations) for trust in government and tax
authority, equity and fairness of tax system. On a 4 Likert
scale, the mean value for all variables are more than half Equity and tax morale
of the point scale. The mean score for trust in
government, equity, fairness in tax system, confidence in H0: There is no correlation between equity and tax morale
legal system, trust in tax authority, respect by tax H1: There is a correlation between equity and tax morale
authority and complexity of tax system are 2.15, 2.30, P- value of 0.000 is less than the significance level of
2.11, 2.33, 2.18, 2.19 and 2.82 respectively 0.01, therefore H1 is accepted. We can conclude that
there is a positive correlation between equity and tax
morale.
Chi-square test
H0: There is no correlation between tax evasion and tax H0: There is no relationship between trust and tax morale
morale H1: There is a relationship between trust and tax morale
H1: There is a correlation between tax evasion and tax
morale We can accept H1 as the p- value of 0.000 is less than the
significance level of 0.01. we can observe that there is a
The p value of 0.000 is less than the significance level of positive relationship between trust and tax morale.
Vythelingum et al. 5
Table 4. Mean score by trust and equity in government, in legal system, tax authority, fairness in tax system.
Statistics
Statement Mean Median Mode Std. deviation
The government is spending tax revenue wisely 2.20 2.00 2 0.933
The exchange between the tax paid and the government services are
2.30 2.00 2 0.928
equitable
The government is trustworthy in Mauritius 2.15 2.00 2 0.958
The present tax system benefits the rich and is fair to the ordinary working
2.11 2.00 2 0.893
man or women
Do you have high confidence in the legal system in Mauritius? 2.33 2.00 2 0.929
Tax authority is trustworthy 2.18 2.00 2 0.942
Tax authority respects you 2.19 2.00 2 0.926
Tax system is simple and easy to understand 2.82 3.00 3 0.870
Based on this, the logistic regression of attitudinal Different variables such as respect and fairness have
determinants used in the model is: been used to examine the attitude toward tax authority.
MRA is the legal tax institution in Mauritius. Trust in MRA
log(p/1-p) = b0 + b1*age + b2*gender + b3*Marital status will help in analysing tax morale among taxpayers.
+ b4*Tax evasion +b5*social norms + b6*Civic duty
+b7*Preferences+ b8*Moral sentiment+ b9*wise+ Error term
b10*Equity+ b11*complexity+ b12*trust+ b13*faire+
b14*confidence+ b15* tax authority+ b16*respect where Error terms are variables which are not included in the
p is the probability that taxpayers would not cheat even if regression analysis but still have an influential effect on
they have a chance to. the decision of taxpayers. Those variables are factors
that cannot be control due to their nature such as
corruption, money laundering, black market,
Independent variables
discrimination and so on.
Demographics
Data analysis
Demographic factors such as age, gender, religion,
church attendance, income, marital status and Iteration 0: log pseudolikelihood = -106.88694
employment has been analysed to determine whether Iteration 1: log pseudolikelihood = -64.1757
those factors affect tax morale in Mauritius. Iteration 2: log pseudolikelihood = -52.936387
Iteration 3: log pseudolikelihood = -51.86815
Morale sentiments and social norms Iteration 4: log pseudolikelihood = -51.857085
Iteration 5: log pseudolikelihood = -51.857078
Respondents were asked, if a false income declaration Iteration 6: log pseudolikelihood = -51.857078
will generate anxiety, guilt and shame and if they believe Logistic regression Number of obs = 201
that tax payment is a social norm. They were also asked Wald chi2 (16) = 47.15
if paying their tax is a civic duty for them. Prob > chi2 = 0.0001
Log pseudolikelihood = -51.857078 Pseudo R2 =
0.5148
Attitude toward tax evasion
However, they can be less compliant because they have They contribute to the welfare of the society.
a better knowledge of tax evasion and are aware of
government wastage. Highly educated people have a
higher tax morale as they are less likely to cheat even if Government spending based on our preferences
they have a chance to. In Asian countries, they found that
self-employers are less compliant than full- time 42.3% citizens have a low level of motivation even if the
employees. In India, they observed that part timer government spending is based on their preferences and
employees, retired people and students had higher tax 57.5% are highly motivated to pay tax if government
morale and self employers had a lower tax morale spending is based on their preferences. We can conclude
compared to full-time individuals. In Mauritius, part- time that government spending based on individuals
employees, self-employees, unemployed and retired preferences can improve tax morale in Mauritius.
have a higher tax morale than student and full- time
employees. Furnham (1981) found in an empirical
analysis that a higher degree of protestant work ethic Factors that will improve tax morale
leads to more opposition to taxation. We have found that
people who attend religious services more frequently Moral sentiment
have a higher tax morale than those who attend religious
services less frequently or never. Studies stated that a false declaration will generate
anxiety, guilt or shame if caught. Grasmick and Bursick
Perception of tax evasion (1990) found that guilt and shame is a much greater
restriction than sanctions. Respondents were asked if a
We have observed that taxpayers will pay their tax false declaration will generate anxiety, guilty or shame if
despite the fact that the probability of getting caught is caught. The level of shame and guilt is high in Mauritius
low. The concept of reciprocal said that if many people thus people will be less likely to evade. We can conclude
does not pay tax; therefore, citizen will not feel oblige to that tax morale is high in Mauritius.
pay tax. Thus tax morale will decrease if everyone
perceives tax evasion justifiable. However, in Mauritius,
we have observed that tax morale is high as a large Positive action by the state
amount of people perceived tax evasion as unjustifiable
even if everyone evades tax. Tax morale is high even Smith (1992) and Stalams (1991) indicate that positive
though government spending is not spent on project that action and appropriate uses of tax revenue will increase
benefit them. Government spending based on individuals tax morale. Results show that an increase in positive
preferences can improve tax morale in Mauritius. action by the state and a fair use of tax revenue will
increase tax morale in the perspective of Mauritian.
Motivational factors to pay tax
Deterrence factors Trust in government
we can observe that in Mauritius, it seems that Trust in the government is a statistically significant to tax
enforcement and sanction have an impact on tax morale. Participates were asked whether more trust in
compliance. The higher the fear of sanction, the higher government will increase tax morale. We have concluded
will be tax compliance. A lower tax rate and a lower fine that trust in government will increase tax morale.
rate will motivate them to pay tax. However, a low tax
rate, enforcement and fines is not considered as tax
morale as people pay tax because people are afraid of Fairness in tax system
sanctions and not because of a moral duty to pay tax.
Several studies have indicated that if taxpayers believe
that tax system is unfair, the moral cost will decrease
Civic duty leading to a fall in tax morale. Participants were asked if
fairness in tax system will increase tax morale. We can
Some taxpayers are not self-centred. They are also
interested in the welfare of the general society. Tax observe that in Mauritius, a fair tax system will increase
payment can be a civic duty for some taxpayers. A sense tax morale
of civic duty is developed when citizens are involved in
political decision making and thus this will enhance tax Respect
morale. We can observe that the Mauritian society have a
high tax morale as tax payment is a civic duty for them. People were asked whether they would voluntarily pay
Vythelingum et al. 9
their tax if tax authority respect them more. And we implement more deterrence policy to increase tax
conclude that more respect by the tax authority will compliance.
increase tax morale which is in line with Frey and Feld
(2002) and Alm and Torgler (2006) who argued that tax 2. It is imperative to educate young people on the
morale will be higher if tax officer treat taxpayers with important of the role of taxes and their contribution to the
respect. welfare of the population. Future taxpayers should know
about their rights and duties with regards to tax.
CONCLUSION
3. If individuals believe that there is corruption in public
The assessment of tax morale has been an academic institution and among tax officials, the willingness to pay
research in most countries. Tax compliance is important taxes will decrease, thus lowering tax morale. Most
for the development of the economy. It can be seen that participants have stated that tax system is not simple and
there is a direct relationship between tax morale and tax it is difficult to understand. (appendix) Simplifying tax
compliance. system and increase the transparency of tax policy can
In this study, we can determine that deterrence factors positively influence attitudes of individuals towards taxes.
such as sanction, fines, tax rates and probability of This is a way to improve tax morale.
detection influence tax compliance decision, however, we
can conclude that the willingness of each individual to 4. Continuous training is needed in order to improve the
comply with the tax law is also a function of tax efficiency and help in carrying their work in a professional
compliance. manner. This will help in increasing populations trust
The study empirical findings indicate that equity, social towards them which will result in an increase in tax
norms, attitude toward tax evasion, trust in government morale.
and authority, fairness in tax system and confidence in
legal system have a significant impact on tax morale. It 5. Government should introduce policies that make
can be concluded that tax morale will increase if trust, people believe that tax payment is a social norm. A
equity, fairness and social norms increase. Moreover, a positive attitude toward tax payment will help in improving
rise in tax evasion will fall in tax morale. Some of our tax compliance and this can be done by trying to
result is in line with previous empirical finding sensitize people and by a reduction in government
In Mauritius, it can be said that the population thinks wastage. Government should spend tax revenues on
that the government is not trustworthy and that it does not activities such as health and safety, education,
spend tax revenues wisely. They also do not think that infrastructures and road. Moreover, they should create
the MRA can be trusted and it is also true that the MRA employment and reduce inequality distribution in income
does not respect the people. Moreover, the population and wealth. This will result in an increase in trust in the
perceives the Mauritian tax system as unfair. It has also government leading to an improvement in tax morale.
been found that the exchange between the performed
government services and tax paid were not equitable. LIMITATION OF STUDY
Mauritius is highly corrupted therefore; the population
does not trust the government. It was time consuming to collect and analyse responses.
It was costly. Some people do not have a good
RECOMMENDATION knowledge on taxation therefore, they do not understand
the questions properly so there is biased in responses.
Based on the findings in this study, we hereby make Responds from age group above 60 was difficult to obtain
recommendation that will increase tax morale as it has because it was an online survey. They are not updated
been concluded that not only deterrence increase tax with new technology. The answers might be biased.
compliance but tax morale also can increase tax People were asked if they would cheat if they had a
compliance. Government should take tax morale into chance to. This question might be sensitive in nature that
consideration as this study has proved that tax morale might discourage them from participating in the survey.
has an effect on tax compliance. Policies should be Furthermore, a high level of honesty might be observed
developed to increase tax morale. in the survey as people are afraid of legal actions even
though they were assured than all information was strictly
1. Most participants have agreed with the statement that confidential.
tax evaders being audited in a more detailed manner will
decrease tax evasion. The government can increase
audit rate in order to decrease tax evasion. Moreover, Conflict of Interests
deterrence factors have proved to be an effective way to
increase tax compliance therefore, the government can The authors have not declared any conflict of interests.
10 J. Account. Taxation
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