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The role of religiosity in tax morale and tax compliance

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The role of religiosity in tax morale
and tax compliance
Jeff Pope and Raihana Mohdali*

Abstract
The role of religiosity has been relatively neglected in the tax compliance literature
hitherto. The growing trend of emphasising non-economic factors in determining tax
morale and compliance rather than economic deterrence models is recognised. This
paper discusses the key components of the literature and the growing importance
of research into tax morale and within that, the role and increasing yet still very
limited recognition of religiosity. This includes an analysis of its development by a
few pioneering researchers largely outside the tax field. This development essentially
comprises early small scale survey studies in the U.S.A. and more recent studies with
a wider international coverage. However the latter tend to rely on omnibus surveys
such as the World Values Survey. Reasons for the likely importance of religiosity are
fully discussed. Conceptual, theoretical and methodological issues and difficulties of
research in this niche area in a global context are discussed and approaches going
forward conclude this timely paper.
“Render unto Ceaser the things which are Ceaser’s, and
unto God the things that are God’s” (Matthew 22:21)
“Say! Do you know better than Allah?” (Qur’an 2:140)

* Professor and Director of the Tax Policy Research Unit (TPRU), School of Economics and
Finance, Curtin University; Lecturer at Universiti Teknologi Malaysia and a Doctoral Candidate
at the TPRU, School of Economics and Finance, Curtin University, respectively. The authors
thank the referee for valuable comments. The usual caveats apply.
This paper was accepted for publication on 19 January 2011.
565
566 (2010) 25 AUSTRALIAN TAX FORUM

1 Introduction
Tax compliance has long been an issue for governments throughout the world and
there is a large and rich research literature in this field. Whether this research focuses
on the level of and reasons for individuals, companies and other entities meeting
their legal tax obligations or whether it investigates the level of and reasons for tax
evasion, the outcome is effectively the same: to shed light on government and tax
authority policies in raising revenue in order to finance government expenditure.
Within this broad field of tax compliance, historically the weight of research was
based on economic deterrence models. However, this came under various criticisms
particularly from researchers and administrators who understood the important role
of non-economic factors particularly the role of a country’s culture and individual
attitudes. In other words, current recognition of sociological, psychological and other
factors counter-balances the earlier economic deterrence models.
Whilst terminology may have changed somewhat over the last twenty or thirty years,
there is little doubt that much greater weight is now given to the role of non-economic
factors.1 The term ‘tax morale’ is now commonly used in the tax literature to describe
the intrinsic motivation to pay taxes. Within the role of tax morale in determining
tax compliance, the term religiosity is being increasingly recognised and used. It may
be simply defined as the condition of believing in a superhuman controlling power
especially in a personal God or gods entitled to obedience, faith and worship.2 This
concept is important as much of the tax literature investigates the role of moral values
held by individuals towards tax compliance. Whilst religious people would of course
be expected to have high moral values, atheists may also have similarly high values.
In other words, in a tax compliance research context, the role of religiosity is different
from that of moral values, although within any taxpaying population there may well
be some commonality.
The focus of this paper is therefore a discussion and analysis of the role that a belief
in God (or gods) or other spiritual beliefs plays in determining the extent to which
people fully meet their legal tax obligations within any developed or developing
country. It is based on the assumption that a person’s religious beliefs are applied in
their daily lives albeit to varying degrees. It is apparent that further theoretical and
empirical contributions are now needed to bridge the numerous gaps in the current
limited number of studies that have various deficiencies. This paper is organised as
follows. The next section discusses some key research in the very broad tax compliance
literature. Section three then narrows this discussion down to the role of tax morale,
followed in section four by the role of culture. The main fifth section discusses the role
of religiosity in tax compliance. Section six assesses the strengths and particularly the

1 These changes in terminology and developments in understanding are discussed more fully in
Pope and McKerchar (2010).
2 Based on the definitions of religiosity and religion as found in the Concise Oxford Dictionary
(1990). It is uncertain how Buddhism as one of the world’s leading religions fits into this
definition. The concept of spiritual beliefs probably needs to be included.
 The role of religiosity in tax morale and tax compliance 567

weaknesses of tax morale research based on the World Values Survey. Section seven
considers the theoretical and methodological research challenges in a global context
that lie ahead. The final section makes some brief concluding comments.

2 Tax compliance
Tax compliance has always been a major issue for governments worldwide. A
number of opportunities are available for taxpayers to evade taxes, either through
underreporting income or overstating deductions. There are several interpretations of
tax compliance available, but the definition provided by Roth, Scholz and Witte (1989,
p. 2) is commonly cited: “the taxpayer files all required tax returns at the proper time
and the returns accurately report tax liability in accordance with the rules, regulations
and court decisions applicable at the time the return is filed”. James and Alley (2000, p.
29) describe the meaning of compliance as a “continuum of definitions” from a narrow
approach that focuses on the tax gap to a wider approach focusing on taxpayers’
behaviour. However the growing concern that people will evade tax has shifted lately
to focus more on why many people comply willingly and voluntarily.
Pioneering research by Allingham and Sandmo (1972) using the economics-of-
crime approach suggests that one possibility to ensure people pay their tax is to use
a deterrence policy, namely that higher penalties and audit probabilities discourage
cheating. A review of many different research studies by Fischer, Wartick and Mark
(1992) suggests that generally, these studies point to a positive relationship between
audit probability and compliance. However, Alm, Jackson and McKee (1992) found
that even though high audit rates and low tax rates contribute to high compliance,
using greater penalties is ineffective in increasing tax compliance. This is emphasised
by Schwartz and Orleans (1967, p. 300) who stated “the threat of punishment appears
to produce some resistance to compliance”. In short, the economics-of-crime approach
does not explain the reasons why many people willingly comply with tax laws.
Alm, Sanchez and De Juan (1995, p. 15) argue that “to explain tax compliance requires
recognizing the myriad factors that motivate individual behaviour, factors that go
beyond the standard economics-of-crime approach to include theories of behaviour
and other social sciences”. Rather than relying heavily on the narrow economic
approach to encourage tax compliance, it is better to explore other approaches to
understand non-economic factors that might influence taxpayers’ behaviour (James,
Murphy, & Reinhart, 2005). For example, a behavioural approach is more appropriate
for exploring people’s voluntary and willing acceptance of tax compliance. This view
assumes that individuals are not simply independent, selfish and utility maximisers
but that they interact with other human beings according to differing attitudes, beliefs,
norms and roles (James & Alley, 2000).
Based on the fourteen tax compliance variables identified by Jackson and Miliron
(1986), Fisher, Wartick and Mark (1992) have grouped ethics or morality, tax fairness
and peer influence together representing factors influencing an individual’s tax
568 (2010) 25 AUSTRALIAN TAX FORUM

compliance behaviour. Some people place more value on their moral integrity than
anything else, even though they have to pay a high price for it (Reckers, Sanders, &
Roark, 1994). Therefore, it is possible for taxpayers to keep complying with tax laws
even though they do not perceive the tax system to be fair. Taxpayers may perceive
unfairness based on the belief that there are no benefits from the tax they have paid
and on the perception of inequity in the tax system. It is noted that an equitable
relationship between taxpayers and governments will encourage tax compliance
(Spicer & Becker, 1980). Individuals are not only influenced by their moral or ethical
values and their perceptions toward tax fairness but also by their peers in making
decisions as to whether or not to comply (Witte & Woodbury, 1985). However, neither
of these approaches seems to provide a better solution to the puzzle of tax compliance.
Some researchers have suggested a fiscal psychological approach, a blend of both
the economic and behavioural approaches, as another option in better explaining
tax compliance e.g. Schmolders (1970); Hasseldine and Bebbington (1991). This
approach provides a better understanding of the way people behave in their economic
lives and explores the effects of economic issues on people’s behaviour. It is related to
issues of choice and decision-making. For example, it is argued that a government
should develop positive policies such as reducing tax rates in order to encourage
taxpayers’ positive behaviour which consequently will have a positive influence on
taxpayers’ compliance decisions. The interaction between taxpayers and government
would thus have a significant influence on tax morale. Tax morale is suggested as one
of the factors influencing taxpayers’ behaviour, applicable across different countries in
prior studies e.g. Pommerehne, Hart and Frey (1994).

3 Tax morale
Tax morale is commonly defined in the tax literature as the intrinsic motivation to pay
taxes. It is described by Torgler and Murphy (2005) as the moral principles or values
held by individuals about paying their taxes. In order to explain tax morale as one of
the factors influencing tax compliance, it is crucial to understand the elements that
shape tax morale. Even though it seems crucial, to date, the concept of tax morale
remains open to interpretation (Pope & McKerchar, 2010). The term “black box” has
been used to illustrate how tax morale has been treated by most studies without a
clear picture of the actual factors influencing tax morale being drawn (Feld & Frey,
2002, pp. 88-89).
The complicated interaction between taxpayers and governments, known as the
psychological tax contract, has been used to explain the elements that make up tax
morale (Feld & Frey, 2007). In this contractual relationship, each contract partner
has duties and rights in three ways. Firstly, the equitable fiscal exchange where prior
studies e.g. Feld and Frey (2006) and Torgler et al. (2008) suggest that taxpayers tend
to comply with tax laws when taxpayers receive public services in return for the taxes
they pay. This has a significant positive effect on tax morale. Secondly, the political
procedures where taxpayers can actively participate in the process of governmental
 The role of religiosity in tax morale and tax compliance 569

decision making. Many studies e.g. Pommerehne, Hart and Frey (1994); Torgler
(2005); Torgler and Schineider (2007) found that if taxpayers have direct democratic
rights, tax morale improves significantly. Tax morale is also influenced substantially by
trust in government and legal systems e.g. Frey (2003); Torgler (2003), and this trust
can only be achieved if the government can fulfil their requirements (Hardin, 1998).
Further, trusting other citizens and political leaders to stick to their social contract is
found to be one of the contributing factors for taxpayers to pay taxes willingly (Scholz
& Lubell, 1998). Finally, there is evidence from studies such as Feld and Frey (2002)
and Torgler (2005) that tax authorities’ treatment of taxpayers has a significant effect
on tax morale. Swiss citizens acknowledge respectful treatment by their government
with higher tax compliance and this research supports the existence of a psychological
tax contract in Switzerland (Feld & Frey, 2006).
Another element that underpins tax morale, as suggested in previous research, relates
to social norms. Social norms are expected to be at their highest level when tax morale
is high e.g. Riahi-Belkaoui (2004); Torgler (2002); Torgler et al. (2008). The focus of
social norm here is more on personal moral beliefs and peer influence. Personal moral
belief is found to be more influential in affecting tax compliance than peer influence
(Bobek, Roberts, & Sweeney, 2007) and different terms are used to describe morality
in previous research such as ethics (Song & Yarbrough, 1978), civic duty (Slemrod,
1998), moral obligation (Bobek & Hatfield, 2003) and the willingness to obey (Torgler,
et al., 2008). Largely, the study of moral values in tax compliance research has been
overlooked despite the fact that Andreoni, Erard and Feinstein (1998) pointed out
the need to add moral and social dynamics to a tax compliance model since it is
considered an undeveloped area of research. In regard to peer influence, it is expected
that taxpayers are influenced by information about how other taxpayers handle
their tax matters (Torgler, 2004). These two elements may act as driving factors to
motivate taxpayers in making the right decisions according to tax laws. However,
there is negligible study of social norms related specifically to tax morale or even tax
compliance. As argued by Alm, Sanchez and De Juan (1995, p. 7), “social norms may
therefore be a dominant, although also a largely unexplored, factor in unravelling the
puzzle of tax compliance.”
Recent research has started to explore religiosity as one of the potential elements
influencing tax morale. Religiosity is similar to personal moral beliefs, only this
form of moral beliefs comes from religious motivation. Margolis (1997) argues that
religiosity encourages moral force to differentiate and choose between right and
wrong behaviour in any religion. Based on the findings from previous research,
religiosity appears to have a positive impact on tax morale in more than thirty
countries including Switzerland, Belgium, the USA and Canada (Torgler, 2003, 2006;
Torgler & Schneider, 2007). Religiosity is discussed in detail later.
Based on the elements discussed above, it seems that cultural environment plays
a critical role in the decision making process besides an individual taxpayer’s own
attitudes. The cultural environment essentially comprises the type of government
(including the tax authority) and the nature of society (including peer influence).
570 (2010) 25 AUSTRALIAN TAX FORUM

An individual taxpayer may thus consider his/her experiences with such cultural
elements during the process of tax compliance decision making. At the same time,
he/she may use the internal elements such as moral beliefs and/or religious beliefs
to decide whether or not to comply. These broad influences are shown in Figure 1.
Overall, tax morale seems to provide an alternative way of explaining tax compliance,
especially from a non-economic perspective to complement the economic approach.

Figure 1: Main influences in the formation of tax morale

Cultural Environment
Individual Attitudes

Government Moral Beliefs Tax Morale

Society Religious Beliefs

Source: Authors

4 Role of culture
Culture refers to the norms, values and beliefs of a particular group or community in
particular areas or geographic locations and shared by its members (Hofstede, 1980).
Hofstede divides culture into four dimensions, of which only two seem to impact on tax
compliance. The first dimension, uncertainty avoidance, deals with uncertainty about
the future. Coping mechanisms are considered through the domains of technology,
law and religion. A country with a higher level of uncertainty avoidance indicates that
the laws and regulations are used to minimize the amount of uncertainty. The second
dimension is individualism, which describes the way people live together. A country
with a low level of individualism means the relationships between individuals are close
and the values shared can influence members to behave and act in a community interest.
Being the first to employ Hofstede’s cultural framework in an international tax evasion
model, Tsakumis, Curatola and Porcano (2007) found that a noncompliant country
is characterised by high uncertainty avoidance and low individualism. This study was
extended by Richardson (2008) to examine not only culture but also the impact of
legal, political and religious variables across 47 countries that share the same findings.
Nevertheless, Richardson believes it is important to consider other variables, such as
religiosity, when analysing tax evasion internationally to improve the model developed
by Tsakumis, Curatola and Porcano (2007). In contrast, it appears that culture does
not have a big impact on tax morale within a country, though there is evidence that
 The role of religiosity in tax morale and tax compliance 571

culture interacts strongly with institutions that impact considerably on tax morale
(Torgler & Schneider, 2004). It seems that tax morale might not be influenced by
culture directly but by other factors that sit within cultural values.
Economic development is believed to be responsible for the change of values during
the process of modernisation within societies with different schools of thought in
the modernisation theory. Some believe that traditional cultural values are replaced
with ‘modern’ values whereas others believe that traditional values remain during the
transition process. Inglehart and Baker (2000, p. 49) in their view of the modification of
modernisation theory propose that “economic development tends to bring pervasive
cultural changes, but the fact that a society was historically shaped by Protestantism or
Confucianism or Islam leaves a cultural heritage with enduring effects that influence
subsequent development”. This approach emphasises the persistence of traditional
values, with religion as one of the critical elements in a society’s cultural formation
which might have a significant impact on a taxpayer’s tax morale.

5 Role of religiosity
Economic development is influenced substantially by religious practices and beliefs
(Weber, 1930). Religion and economy are believed to interact in two directions. The
first direction is the extent to which religiosity responds to economic development.
Barro and McCleary (2003) found that religiosity measurements, such as religious
attendance and religious beliefs, decline when per capita Gross Domestic Product
(GDP) increases. However, when specific economic developments such as education,
urbanization and life expectancy are held constant, religiosity is virtually unrelated
to per capita GDP. The second direction is the extent to which religiosity influences
economic performance. Barro and McCleary (2003) suggest religion serves to
encourage certain behaviours. For example, honesty and work ethics that enhance
productivity indicate that economic growth responds positively to religious beliefs.
Lehrer (2004) proposes religion as one of the determinants of economic and
demographic behaviour by emphasizing the effects associated with religious
affiliation and how the positive outcomes of being a religious individual are related to
well-being and health. This is expected from self-enforcement moral rules based in
each individual belief in their religion as being a benefit not only to themselves but
also society at large. As Anderson and Tollison (1992) suggest, moral capital is a vital
requirement for a market economy to function efficiently. However, the study of the
impact of religion on economic development has been neglected since many scholars
believe the effect of religiosity is decreased with higher economic development
and improved technology, even though a number of researchers disagree (Stark &
Bainbridge, 1987).
Religiosity may be viewed from two main perspectives: religious affiliation and
religious commitment. Religious affiliation refers to the particular religious group
adhered to by individuals such as Islam, Christianity, Buddhism and Hinduism.
572 (2010) 25 AUSTRALIAN TAX FORUM

Hirschman (1983) argues that individuals are influenced by religious affiliation long
before they are born. As suggested by Lenski (1961, p. 311), “religions are carriers of
complex subcultures relevant to almost all phases of human existence and product
of the social heritage of the group”. Thus the historical values of different religious
affiliations may affect individual behaviour differently.
Johnson et al. (2001) define religious commitment or religiosity as “the extent to
which an individual is committed to the religion he or she professes and its teachings,
such that individual attitudes and behaviours reflect this commitment”. Religiosity
may be divided into five dimensions (Glock, 1962). Firstly, the ideological dimension,
by which the followers of the religions are expected to adhere to certain sets of beliefs.
Secondly, the ritualistic dimension - the specific religious practices adhered to by the
followers such as prayer, fasting and meditation. Thirdly, the experiential dimension
which stresses religious experience as the indicator of the level of religiosity. Fourthly,
the intellectual dimension which focuses on religious knowledge used to strengthen
one’s religious beliefs. Finally, the consequential dimension identifies the effects of
adherence to the first four dimensions that guide individuals to behave based on
religious belief, practice, experience and knowledge.
Most of the previous research in this area uses church attendance as a measure of
religious commitment e.g. Grasmick, Kinsey and Cochran (1991); Tittle and Welch
(1983). However, as Bergan and McConatha (2001) have pointed out, it is inadequate
to rely solely on religious attendance as a measure of religiosity, because it might
lead to a vague or inaccurate judgement. An individual may go to mosque or church
because of other reasons such as to please others or to avoid social isolation. Thus
it is inappropriate to conclude that those who frequently attend mosque or church
are highly religious. The multidimensional nature of religiosity has been recognized
as providing a better understanding of its true nature (Wilkes, Burnett, & Howell,
1986). Grasmick, Bursik and Cochran (1991) suggest religious identity salience
(strong religious beliefs) and church attendance be treated separately in measuring
religiosity dimensions. Torgler (2006) introduced the notion of multiple dimensions
of religiosity - ‘church attendance’, ‘church participation’, ‘religious education’,
‘religious beliefs’, ‘importance of religion’, ‘religious guidance’ and ‘trust in church’ - to
represent religious observance. However Pope (2008) in a review of Torgler (2007),
points out the omission of a specific definition of belief in God as a measure of the
level of religiosity. Religiosity seems to be a complex concept that includes not only
behaviour and attitudes that can be observed but also beliefs, feelings and experiences
that cannot be observed. Religious scholars and sociologists have failed to reach a
consensus on whether adequate measures of individual religiosity can be developed.
Thus researchers may decide on the number and types of religiosity dimensions that
suit the nature of their research (Hill & Hood, 1999).
The effect of religiosity on individual behaviour has been investigated by several
researchers. Religiosity is expected to influence certain behaviours based on the results
from these studies, such as cheating behaviour (Bloodgood, Turnley, & Mudrack,
2008; Rettinger & Jordan, 2005), criminal behaviour (Baier & Wright, 2001; Ellis &
 The role of religiosity in tax morale and tax compliance 573

Peterson, 1996) and ethical behaviour (Keller, Smith, & Smith, 2007). The relationship
between religion and behaviour based on these three different models (Greeley, 1963)
is as follows. The Weberian model3 suggests that religion influences a society through
the values held by each individual or known as a religious network as being not only
between religious individuals themselves, but also between non-religious individuals
and religious individuals (Adamczyk & Palmer, 2008). The ‘need disposition’ model4
assumes that people use religion as a coping mechanism to meet life’s challenges.
Pargament et al. (1998) found that religious coping methods work both ways, positively
and negatively with life stressors; however, positive patterns of religious coping are
being used by people more than negative patterns. The final model views religion as a
predictor of behaviour, but neither as a dependent nor an independent variable. This is
because many individuals rely on religious values as a source of their morality to shape
their attitudes and behaviours (Thornton & Donald, 1989).
Studies on tax compliance or tax evasion that include a measure of religiosity are
very limited. Amongst the earliest, Tittle and Welch (1983) explored individual
perceptions on the relationship between religiosity and deviant acts, and one of
them is tax evasion. They suggest that the characteristics of religious communities
will determine the effect of individual religiosity on deviant behaviour in the future.
Welch, Tittle and Petee (1991) use data collected from Catholic parishioners and it
is evident that tax evasion is negatively related to an individual’s private religiosity.
Based on the same sample, the effect of informal sanctions appears to be effective in
curbing certain types of deviance such as tax evasion in a socially integrated church
community (Petee, Milner, & Welch, 1994). Strong religious beliefs are expected to
prevent illegal behaviour through self-imposed guilt, particularly in the case of tax
evasion (Grasmick, Bursik, & Cochran, 1991). Grasmick, Kinsey and Cochran (1991)
not only explore the effects of church attendance on tax cheating, but also measure
the affiliation as an index of religious importance. They discover that those with no
affiliation are more inclined to cheat. Due to the limited empirical evidence related
to this, Riahi-Belkaoui (2004) suggests that further research needs to add social and
religious norms as determinants of tax compliance to complete the contingency
theory of tax compliance, which deals not only with economic factors but also the
institutional and moral factors of tax compliance.
Torgler has undertaken extensive research on the role of religiosity and initially
revealed that tax morale depends positively on religiosity using the World Values
Survey data for 1990 in Canada (Torgler, 2003). He continues with this work by
covering more than 30 countries and confirms the same findings (Torgler, 2006).
His research then explores the determinants of tax morale in various countries and
finds a strong impact of religiosity on tax morale in Germany (Feld & Torgler, 2007),
European countries except for Spain (Torgler & Schneider, 2007) and the USA and

3 The importance of religion is to understand “the historical force of idea in the development of
social life” (Weber, 1949, p. 54).
4 Religion is condemned by Marx (1972) as a form of escapism for people who are oppressed by
the system.
574 (2010) 25 AUSTRALIAN TAX FORUM

Turkey (Torgler, et al., 2008). Findings by Stack and Kposowa (2006) confirm that
people with no religious affiliation are more likely to view tax fraud as acceptable.
A larger sample size of 47 countries by Richardson (2008) confirms a negative
relationship between individuals with high levels of religiosity and tax evasion. While
research findings generally indicate positive relationships between religiosity and tax
compliance or negative relationships between religiosity and tax evasion, Welch et al.
(2005) is a notable exception. They found that the perceptions of tax evasion within a
community have a similar effect on the community members regardless of their levels
of religiosity.
Nearly all of these studies drew on secondary data from several surveys, with the
earlier studies using surveys carried out only in the USA. Most of the research
extracted only parts of the data from large surveys, which were then used repeatedly
in different studies. For example, a Notre Dame study of Catholic Parish Life between
1983 and 1984 was used three times in different research and surprisingly, the latest
study by Welch et al. (2005) came up with contradictory findings to previous research,
even though the same original data was used. This may be due to a small number
of respondents who were predominantly Caucasians. The World Values Survey has
mainly been employed in recent research alongside other surveys. With their large
coverage, these surveys offer rich resources to explore cross-cultural studies. The
outcomes of this research provide good insights from different angles, particularly
into developed and developing countries, even though it is argued that the data may
be less reliable due to a standard questionnaire being applied across countries with
distinct cultural differences. A summary of religiosity studies related to taxation is
shown in Table 1.
Table 1: Summary of religiosity studies related to taxation (1983-2008)
Author Method Sample Size Key Findings
(Year) (sampling method) (relevant to tax and religiosity)
Tittle and Welch 1. Survey by National 1,993 – USA • Individual religiosity appears to impact only
(1983) Analyst Inc. (multistage)a certain deviant behaviour and the effects are
(interviews) more moderate for tax evasion.
Grasmick , Bursik 1. Oklahoma City Survey 330b – USA • Religious identity salience and church
and Cochran (Spring 1989) (simple random) attendance are found to influence the
(1991) (face-to-face interviews) inclination to cheat on taxes independently.
Grasmick, Kinsey 1. Oklahoma City Survey 330 – USA • People with no religious affiliation were more
and Cochran (Spring 1989) (simple random) inclined to cheat in taxes than were moderate
(1991) (face-to-face interviews) Protestants but only with little difference.
Welch, Tittle and 1. Notre Dame Study of 2,667 – USA • Private and community religiosity have
Petee (1991) Catholic Parish Life (stratified) negative relationships with the intention to
(1983-84) evade taxes.
(self-administered
questionnaire)
Petee, Milner and 1. Notre Dame Study of 2,667 – USA • The threat of informal sanctions in religious
Welch (1994) Catholic Parish Life (stratified) community seems to be effective for inhibiting
(1983-84) actions such as tax evasion.
(self-administered
questionnaire)
Torgler (2003) 1. World Values Survey (1990) Canada. • Trust in government, pride as a Canadian
citizen and religiosity have a significant
positive influence on tax morale.
The role of religiosity in tax morale and tax compliance
575
Author Method Sample Size Key Findings
(Year) (sampling method) (relevant to tax and religiosity)
Welch et al. (2005) 1. Notre Dame Study of 1,885 (white respondents only) • The perceptions of tax evasion within a
Catholic Parish Life (1983-84) – USA community have similar effects on the
(self-administered (stratified) community members regardless of their levels
questionnaire) of religiosity.
Stack and 1. World Values Survey 36 countries (Argentina, Austria, • The higher the level of religiosity, the lower the
Kposowa (2006) (1990-93)c Belarus, Belgium, Brazil, Britain, level of Tax Fraud Acceptability (TFA).
Bulgaria, Canada, Chile, China, • TFA is approved the most by people with no
Denmark, East and West religious affiliation.
Germany, Finland, France, • The presence of a communist regime reduces
576 (2010) 25 AUSTRALIAN TAX FORUM

Hungary, Iceland, India, Ireland, the influence of religion on TFA.

Italy, Japan, Latvia, Mexico,
Moscow, Netherlands, Nigeria,
Northern Ireland, Norway,
Poland, Portugal, Romania,
Russia, Slovenia, Spain,
Sweden, Turkey and USA.)
Torgler (2006) 1. World Values Survey 30 countries (Not indicated.) • There is strong correlation between religiosity
(1995-97) and tax morale.
• Catholics, Hindus, Buddhists and people
of another religion have high tax morale
compared with people without a religious
denomination.
• Muslims mostly are not significantly correlated
with tax morale.
Author Method Sample Size Key Findings
(Year) (sampling method) (relevant to tax and religiosity)
Feld and Torgler 1. European Values Survey East and West Germany. • Tax morale is significantly higher in East
(2007) (1990-99)d Germany compared to West Germany.
2. World Values Survey However, the levels of their tax morale
(1990-99) converged strongly after their reunification.
• Religiosity and trust in the legal system raise
tax morale significantly.
Torgler and 1. European Values Survey Switzerland, Belgium and Spain. • Trust in the legal system, government or
Schneider (1990-93, 1995-99) parliament, national pride and pro-democratic
(2007) 2. World Values Survey (1999) attitudes have positive effects on tax morale in
all countries.
• Only in Switzerland and Belgium, religiosity
appears to have a robust impact on tax
morale.
Torgler et al. 1. Taxpayer Opinion Survey USA. • Positive attitudes towards tax authority
(2008) 1990 (An American data set) and tax system, trust in public officials, the
2. Face-to-face interviews Turkey. state and other people, a higher sense of
conducted in Turkey (cluster) obedience and religiosity lead to higher tax
(2007-08)e morale.
• A high level of perceived corruption reduces
the willingness to contribute.
The role of religiosity in tax morale and tax compliance
577
 Author Method Sample Size Key Findings
(Year) (sampling method) (relevant to tax and religiosity)
Richardson 1. The Global Competitiveness 47 countries (Argentina, • The higher is the level of tax evasion
(2008) Report (2002-04) Australia, Austria, Belgium, across countries; the lower is the level of
2. World Competitiveness Year Brazil, Canada, Chile, China, individualism, legal enforcement, trust in
Book (2002-04) Colombia, Czech Republic, government and religiosity.
Denmark, Estonia, Finland,
3. Hofstede (2001)
France, Germany, Greece, Hong
4. World Bank (2002-04) Kong, Hungary, India, Indonesia,
5. World Values Survey (1981, Ireland, Israel, Italy, Japan,
1990 and 1995) Korea (South), Luxembourg,
Malaysia, Mexico, Netherlands,
578 (2010) 25 AUSTRALIAN TAX FORUM

6. 2006 World Development

New Zealand, Norway,
Indicators
Philippines, Poland, Portugal,
Russia, Singapore, Slovakia,
South Africa, Spain, Sweden,
Switzerland, Taiwan, Thailand,
Turkey, United Kingdom, USA
and Venezuela.)
a A combination of area probability technique and random selection.
b The sample size used in the Oklahoma City Survey is considered small if compared with more than 400,000 population in 1980 (US Census Bureau, 1980).
However, the sample size is deemed appropriate since face-to face interviews were used during the survey (Salant & Dillman, 1994).
c Discussed in the next section.
d Discussed in the next section.
e This comprised an original survey using primary data for this aspect of the research; the remainder was part of a larger survey.
 The role of religiosity in tax morale and tax compliance 579

In summary, the research discussed above reveals the overall positive impact of
religiosity on tax morale that consequently affects tax compliance. This may indicate
a new emphasis in dealing with tax compliance issues. This area of research provides
a fertile avenue for investigation because it is apparent that religiosity has been largely
neglected in the earlier tax compliance work. Interestingly it has produced some
mixed results in the relatively few studies undertaken to date with recent studies
placing too much reliance on the World Values Survey data.

7 The World Values Survey

In collaboration with the European Values Study, the World Values Survey is a
worldwide network to study social, cultural and political changes. It started in 1981
and now covers almost 90% of the world’s population with five waves of surveying
using standardised questions completed up until 2008.5 The surveys provide a wide-
ranging measurement of values including from religion, politics, economics and
social life. Face-to-face interviews were used to collect data by local field organisations
and this was monitored by academic researchers using random probability samples
whenever possible. It was compulsory for the core questionnaire to be translated into
the local language.
Religion is one of the factors involved in the changing values. Based on the latest
questionnaire available online for the 2005-2006 wave (World Values Survey, 2009),
multi dimensional questions were asked during the interviews such as religious
affiliation, religious attendance, perceived religious, religious beliefs, religious
practices and politics-religion relationship (see Appendix 1). It is interesting to note
that the recent survey in wave 2005-2008 covered a number of additional Muslim
countries such as Egypt and Indonesia. This will provide a good opportunity for
researchers to explore respondents’ differences and to provide a better understanding
of the values of all major religions in the world. The survey is expected to enhance the
knowledge and the understanding of how people in a globalised world “believe, think,
dream, act and react to make the world a better place” (World Values Survey, 2007,
p. 13). Many studies that include religiosity as a determinant of tax morale or tax
compliance use data from the World Values Survey e.g. Torgler (2006); Feld and Frey
(2007). Torgler takes the view that variations in religiosity measurement from the
World Values Survey data can provide a clearer picture of how tax morale is shaped by
religiosity. However it is argued here that some issues in this survey may misrepresent
the actual picture of the role of religiosity in tax compliance.
The first concern is the reliability of the answers provided by respondents since
‘religion or religiosity’ is a sensitive issue for many people in the world. Allport and
Ross (1967, p. 441) state that individuals who answer religious items will use a ‘hit and
run’ approach since they have it set in their minds that ‘all religion is good’. Therefore
they tend to provide all ‘yes’ answers to positive religious statements. Likewise,

5 The five waves were undertaken in 1981-84, 1989-93, 1994-98, 1999-2004 and 2005-08.
580 (2010) 25 AUSTRALIAN TAX FORUM

‘positives episodes’ stored in people’s long-term memories might be one of the

reasons for over reporting church attendance statistics in the USA, – approximated
at 40% of the population, which is probably almost double its actual rate (Hadaway,
Marler, & Chaves, 1993). This concern also extends to the tax morale item. Even with
only one question asked regarding tax morale (see Appendix 1), Alm and Torgler
(2006) consider the single question to be an advantage because it reduces respondent
confusion especially in wide-ranging surveys. However, they also recognize the
advantages of using multiple items to illustrate tax morale as used by Kirchler (1997,
1999). In these surveys, the background of the respondents varies in regard to level of
education, occupation and experience. Arguably, these differences might contribute
to a misunderstanding of survey questions and so lead to different interpretations of
the meaning of tax morale. Thus reliance on only one statement remains a delicate
question of research methodology. This is outside of the control of those researchers
in the field of religiosity who rely upon a survey undertaken by other organisations
such as the World Values Survey.6
The second concern is the simplistic measurement employed in the World Values
Survey because to some extent, Islam and other religions have been perceived to be
identical. For example, church attendance is substituted with praying frequency for
Muslims in question V186 of the survey for the wave 2005-06 (refer Appendix 1). It
is obligatory for Muslims to pray five times a day, but it is not compulsory for them to
perform their prayer rituals at mosques, only a clean place is required.7 Therefore, if
they only pray once or twice a day, their levels of religiosity may not be even close to
those people who attend religious services once a week. This measurement might be
simple but meaningless since these two practices are totally different and a comparison
can only be made from a common perspective - ‘apples to apples’.
The final concern is related to the issue highlighted by Silver and Dowley (2000)
namely that many researchers using data from the World Values Survey make an
assumption that countries are culturally homogenous and so ignore the cultural
differences especially within societies. Rich data from the World Values Survey is very
helpful for researchers to explore difference and so increase mutual understanding
among countries and individuals regardless of ethnicity and religion. However,
with each country holding different cultural values, questions may be interpreted
differently. This might affect the quality of their data and sample representation and
may lead to the wrong inferences and even conclusions being drawn.

6 Researchers in the religiosity/tax field essentially have a choice between an extremely large
international survey such as the World Values Survey in which they have no control over the
questions (especially number and wording) and smaller, manageable and cost-effective surveys
and/or qualitative research such as interviews or focus groups where they can control the whole
research exercise. This choice also of course applies to many other areas of research.
7 It is assumed that this question is related to the daily prayer of Islam: fajr, dhuhr, asr, maghrib
and isha’a. The Friday prayer is performed in a congregation usually at a mosque just after noon
in lieu of dhuhr, though it is only obligatory for Muslim men.
 The role of religiosity in tax morale and tax compliance 581

Exploring methods other than using World Values Survey data may provide different
ways of dealing with these entangled issues and help to increase the reliability and
validity of work in this field. Qualitative methods using focus group interviews may
provide rich information to help researchers to investigate the complexities of the
subject matter. This will allow researchers to interpret the problems not only based
on the data but also observations during the interviews (McKerchar, 2008). The role
of researchers is very important in focus group research as they have to be aware,
respectful and sensitive during the process of collecting data since religiosity is a
delicate issue and respondents need encouragement to provide honest answers. In
addition, researchers need to prevent their own religious values interfering with the
respondents’ answers because even though the researchers and respondents adhere to
the same religion, their beliefs and practices may not be identical (Rey, 1997). Even
though it is argued that the focus group method is inappropriate for sensitive topics
(Morgan, 1996), several researchers have challenged this misconception by stressing
the dynamics of this method which not only encourage people to share opinions but
also provide generous information to be interpreted by researchers through different
levels of communication (Kitzinger, 1994; Wellings, Branigan, & Mitchell, 2000).

8 Major conceptual, theoretical and methodological

research challenges in a global context
After many attempts from different perspectives to fully understand tax compliance,
there are still gaps in our knowledge that remain to be investigated (Pope &
McKerchar, 2010). Improving tax compliance continues to be a major challenge for tax
authorities, as well as governments worldwide. More accurate information regarding
how taxpayers react to tax laws might give governments a better picture and allow
tax authorities to devise better tax regulations. Much remains to be done, and there
are challenges to face in regard to religiosity as a variable in tax compliance research.
This section discusses some of the main conceptual, theoretical and methodological
challenges in any assessment of the role of religiosity in tax compliance in the context
of global cultural diversity. This contrasts with the previous section where many
studies that use World Values Survey data essentially assume cultural homogeneity. It
is not intended to be a comprehensive analysis of every possible factor involved. An
international perspective is adopted as far as practicable.
Taxation is considered a sensitive issue. Some people refuse to discuss their tax matters
because they believe information about their income levels is confidential. Similarly,
religion is also regarded as a sensitive issue. This is especially so if individuals have
to declare to others how religious they are. Possibly, most people may be reluctant to
talk about the issue and find it quite difficult to reveal the strength of their beliefs. Less
religious people may worry about other people’s perceptions of them if they admit
that they are not so religious. Very religious people may avoid giving direct answers
about their beliefs and practices due to constraints of their religion. Thus answers
given by respondents may not truly represent actual levels of religiosity.
582 (2010) 25 AUSTRALIAN TAX FORUM

Religions are different, especially in regard to beliefs and practices. In religious

practice for example, it is compulsory for Muslim men to go to the mosque every
Friday to perform their Friday prayers, and Christians are encouraged to attend
worship services every Sunday regardless of their gender. Approximately 19% of
Australians (National Church Life Survey, 2004) and 15% of the United Kingdom
(UK) citizens (BBC News, 2007) are regular church attendees (at least once a month).
If church attendance is the only item that measures the level of religiosity, Muslim
women can be regarded as not being religious at all even though they still perform
their prayer rituals at home. In most religions, there is a system of fasting. Fasting for
some religions such as Islam and Buddhism is a practice of self-control and builds the
feeling of empathy towards the poor. However, the duration and rules of fasting vary
between religions. Islam requires their followers to fast from dawn to sunset with no
food, drink and marital relations during Ramadan, the 9th month in the Islamic Lunar
calendar. Some Buddhists abstain from solid foods but certain liquids are allowed
after noon during full moon days or Buddhist holidays. The issue of differences not
only occurs between religions, but also within one main religion (Glock, 1962).
For example, Sunni, Shi’a and Sufi are the variations of Islam and Roman Catholic,
Orthodox Eastern and Protestant are three broad categories of Christianity. Due to
this complexity, standardization of the level of religiosity between religions or even in
a single religion seems to be a very difficult if not impossible task.
Some religions impose or strongly encourage religious giving on their followers. For
instance, Muslims are obliged to pay zakat because it is one of the five pillars of Islam.
Zakat is paid from many types of wealth and one of them is income zakat. Muslims
have to pay zakat for 2.5% of their total gross income per annum as an instrument
for social justice to help the needy (Lembaga Zakat Selangor, 2006). A tithe in
Christianity is a tenth of one’s income, paid as a voluntary contribution to support
a religious organisation (Dahl & Ransom, 2002). Some forms of religious giving are
treated as a tax deduction in certain countries such as Taiwan (Chang & Chang, 2006)
and zakat in Malaysia (Kasipillai, 2005). Taxpayers may well react to the benefit of tax
deductions by contributing more religious giving because the real cost of this is lower
and not because they have high religious beliefs.
In reality, it is near impossible to identify people with the purest level of religiosity but
people who claim to have no religion are identifiable, especially in Western countries.
Australian statistics indicate 3.2% to 18.7% of the population from the 2001 census to
the 2006 census (Australian Bureau of Statistics, 2006) declare themselves as having no
religion and in the UK, the 2001 census indicates a figure of 15.5% of the population
(Office for National Statistics, 2008). However, in certain countries such as Malaysia
only a small group of people claim to have no religion, namely 0.8% of the population
based on the 2000 census (Department of Statistics Malaysia, 2001). Having a high
degree of ‘collectivism’ as noted by Hofstede (2009), with a close-knit family style
of society and a sharing of strong values and beliefs, might be key reasons for the
small number of people without religion in Malaysia. Arguably, not only religious
people abide by tax laws but people having no religion also do so. The latter may be
 The role of religiosity in tax morale and tax compliance 583

solely due to strong moral values in each individual with no influence from religious
values. Therefore, the behavioural differences, if any, between religious persons with
high morals and atheists with high morals also needs to be fully explored. In other
words can researchers be sure there is a distinct difference in taxpayers who are
religious compared with other groups of taxpayers? If not then certainly religiosity as
an explanatory variable in tax compliance disappears, although it might be replaced
with another term. Additionally, a distinction needs to be made between individual
(disaggregate) and population (aggregate) terms. In theory, some positive religiosity
effects may be observable at an individual level yet other factors being so complex
and perhaps unmeasurable mean that these effects have little if any meaning at a more
aggregated level.
From a theoretical perspective there are three main possibilities regarding the role of
religiosity in tax compliance:
1. No discernable or measurable effect.
2. A discernable or measurable gradual (or linear) effect i.e. the level of tax
compliance increases as (measured) religiosity increases.
3. A discernable or measurable effect once a certain level of threshold is
reached i.e. the level of tax compliance is higher once a certain level of
(measured) religiosity is reached.
The relationship of these three theoretical perspectives to previous tax compliance
literature may be succinctly assessed. Overall, religiosity is hardly mentioned. With
limited studies to discuss, the first possibility is only supported by Welch et al. (2005)
who state that tax compliance is not influenced by the degree of religiosity. Most of
the studies, the early as well as the more recent ones, support the second hypothesis
namely the positive influence of religiosity on tax compliance. However until now
the third possibility remains unexplored. This is recommended as a high priority
hypothesis for future research.
Another issue affecting not only religiosity research but tax compliance work in
general is the bias towards richer countries particularly but not limited to the USA,
Canada, the UK, Australia and New Zealand. On the other hand, being a substantial
issue for most countries, tax compliance has attracted many scholars from a variety
of disciplines ranging from economics, accounting, psychology, sociology and
criminal justice. Even with many theoretical models offered by different disciplines
using different approaches, a clear and definitive understanding of tax compliance
remains since most of the studies originate from the USA. The applicability of this
understanding to other countries may be limited (Hasseldine & Li, 1999). Whilst
there is a good balance over various disciplines, there is little if any coverage of
many geographical areas. A more holistic, international focus is required to add to
the existing body of research that currently comes mainly from developed countries.
Even though there is no definite tax compliance strategy for each country because of
the contextual uniqueness, McKerchar and Evans (2009) believe that the growth of
tax compliance research will help shape a compliance program that can be applied
584 (2010) 25 AUSTRALIAN TAX FORUM

to developing countries. The focus on religiosity as one of the possible factors in

a more complete understanding of tax compliance is in line with the advice of the
Organisation for Economic Co-operation and Development (2004, p. 71), which
suggests the need to address the underlying drivers of compliance behaviour.
A holistic approach requires data collected from all over the globe and this can
conveniently be done thorough cross-cultural surveys which provide large quantities
of data. Researchers from many areas employed the data to learn different cultural
values in individuals that shape their attitudes and behaviours. However the
generalisation of the findings from these studies must be considered with the
impediments of the cross cultural survey. For example, the fundamental problem of
the cross cultural survey is that the term culture is not properly defined (Roberts
& Boyacigiller, 1984). Therefore respondents will be divided into different cultural
groups according to geographical area or country despite the fact that each country
is multicultural (Nasif et al., 1991). The language of the instrument also contributes
to the way people respond to questions and the interpretations are based on their
cultural values (Harzing, 2005). The timing of the survey for each country should be
equivalent because if the time gap is too great, the views are incomparable (Sekaran,
1983). Despite its problems, cross-cultural surveys provide valuable knowledge in
understanding diverse cultural values. The research design should be improved and
appropriate methodological tools should be adopted to deal with the complexity of
this field of research (Tayeb, 1994).

9 Concluding comments
To sum up, religion is very influential in many people’s lives and helps answer many
questions on many aspects of life. All religions generally serve the same purpose in
promoting good behaviour and discouraging bad behaviour. Religion is expected to
provide internal control for self-monitoring and self-enforcement in moral behaviour
or can be termed as “supernatural policing” (Anderson & Tollison, 1992, p. 376).
Previous studies have revealed the impact of religiosity in many areas including tax
compliance. Religious commitment is used as a key variable to measure individuals’
levels of religiosity based on the application of religious values, beliefs and practices
in their daily life. Among the standard measurements used in measuring religious
commitments are church attendance and religious beliefs. These measurements have
been employed across religions and countries, despite the dissimilarity of each religion.
There are variations among different religions and even within each religion different
beliefs and practices are adopted. These differences are influenced by different cultures
formed from historical values a very long time ago. Consistently, it is found that the
personality of an individual is not only influenced by genetics but also cultural values
that are shaped by a religion (Saroglou & Munoz-Garcia, 2008). There are two main
issues. Firstly, it is inappropriate for the definition of religious commitment to be
standardised for all religions. A specific definition of religious commitment for each
religion will give a better picture by representing the actual level of religiosity for
 The role of religiosity in tax morale and tax compliance 585

that particular religion (or even branch or section). Secondly, the measurements for
religious commitment must be refined to avoid bias towards certain religions. For
example, church attendance is relevant to Christianity but not to other religions.
Most previous studies have used available data including from the World Values
Survey to study the role of religiosity in tax compliance or, more specifically, tax
morale. However, there are arguments about the reliability and validity of the data
especially in cross-cultural studies e.g. Davis, Dowley and Silver (1999); Silver and
Dowley (2000). Recent growing interest in international and cross-cultural tax
compliance research offers better opportunities for future researchers to explore new
developments in the theory of tax compliance, as well as working with a range of
research methods (Richardson & Sawyer, 2001). Exploring other ways of gathering
data might help to increase the data reliability and validity particularly in this area of
research.
The tax compliance issue is a complex and long-standing one that has not yet
been fully resolved, even though many attempts have been made. The inclusion of
religiosity as a possibly important factor in determining tax morale complicates
tax compliance research still further because of its sensitivity. Moreover, there are
profound measurement issues both within and across the major religions of the
world, let alone including the myriad of minority religious beliefs. Researchers need
to use the best possible approaches to cater for such differences, not only in religion
but also in the cultural context in which they lie. Future researchers using qualitative
methods such as interviews and focus groups will have to challenge carefully their
respondents to open up during the discussion to give a more complete picture and
understanding of the true situation.
Given the paucity of studies to date, more studies are needed to explore contrasting
countries with different styles of government, cultural values and predominant
religious beliefs. Moreover, a range of different methodologies is ideally needed, from
reliance on global omnibus surveys such as the World Values Survey to very small
niche studies based on the behaviour of a small group of individuals that attempt
to identify and analyse the religious component that leads to their tax morale and
compliance behaviour. Looking to the future, even if such studies are largely successful,
it will remain a great challenge to tax authorities to practically use such information in
improving voluntary tax compliance given the sensitivities involved.
586 (2010) 25 AUSTRALIAN TAX FORUM

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Appendix 1

Relevant Religiosity/Tax Questions from the World Values Survey Questionnaire

(2005-2006)
For each of the following, indicate how important it is in your life.
Very Rather Not very Not at all
important important important important
V9. Religion 1 2 3 4

Here is a list of qualities that children can be encouraged to learn at home. Which, if
any, do you consider to be especially important? Please choose up to five.
Mentioned Not mentioned
V19. Religious faith 1 2

Could you tell me whether you are an active member, an inactive member or not a
member of that type of organization?
Active member Inactive member Don’t belong
Church or
V24. religious
organization 2 1 0

For each organization, could you tell me how much confidence you have in them: is
it a great deal of confidence, quite a lot of confidence, not very much confidence or
none at all?
A great deal Quite a lot Not very much None at all
The
V131.
[churches]* 1 2 3 4
* [Substitute “religious leaders” in non-Christian countries.]

V185. Do you belong to a religion or religious denomination? If yes, which one?
No Do not belong to a denomination 0
Yes Roman Catholic 1
Protestant 2
Orthodox (Russian/Greek/etc.) 3
Jew 4
Muslim 5
Hindu 6
Buddhist 7
Other (write in): _________________________________ 8
 The role of religiosity in tax morale and tax compliance 595

V186. A
 part from weddings and funerals, about how often do you attend religious
services these days?
1 More than once a week
2 Once a week
3 Once a month
4 Only on special holy days
5 Once a year
6 Less often
7 Never, practically never
(Note: In Islamic societies, ask how frequently the respondent prays?)

V187. Independently of whether you attend religious services or not, would you say
you are:
1 A religious person
2 Not a religious person
3 An atheist
Generally speaking, do you think that the [churches]* in your country are giving
adequate answers to:
Yes No
V188. The moral problems and needs of the individual 1 2
V189. The problems of family life 1 2
V190. People’s spiritual needs 1 2
V191. The social problems facing our society 1 2
*[In non-Christian societies substitute “religious authorities” for “churches”]

V192. How important is God in your life? Please use this scale to indicate.
Not at all important Very important
1 2 3 4 5 6 7 8 9 10
V193. D
 o you take some moments of prayer, meditation or contemplation or
something like that?
1 Yes
2 No
596 (2010) 25 AUSTRALIAN TAX FORUM

How strongly do you agree or disagree with each of the following statements?
Neither
agree
Strongly nor Strongly
agree Agree disagree Disagree disagree
Politicians who
do not believe in
God are unfit for
V194. public office.
Religious leaders
should not
influence how
people vote in
V195. elections.
It would be better
for [Brazil]* if
more people with
strong religious
beliefs held
V196. public office.
Religious
leaders should
not influence
government
V197. decisions.
* [Substitute your own nationality for “Brazil”]

Please tell me for each of the following actions whether you think it can always be
justified, never be justified, or something in between.
Never justifiable Always justifiable
Cheating on taxes if
1 2 3 4 5 6 7 8 9 10
V200. you have a chance

Source: Extracted from World Values Survey (2009)

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