THE IMPACT OF CORRUPTION ON TAX MORALE: A STUDY OF SELECT BUSINESS ORGANIZATIONS IN ADDIS ABABA, ETHIOPIA

Year 2016, Volume: 8 Issue: 1, 48 - 60, 01.06.2016

Abebe Bayu Chariye

Abstract

The overall purpose of this study is to assess the impact corruption on tax morale. The
researcher used survey method for the study. Data for the survey study were collected
from the target populations by means of self-administered questionnaire. From the
populations, the sample was select by using stratified sampling to obtain a
representative sample from taxpayers of business organization. An ordered probit
model is employed to analyze the impact of corruption on tax morale. The results
showed that tax morale (dependent variable) is correlated at -0.3093 with corruption
at 5 percent significance level and there is a significant negative correlation between
corruption and tax morale at a p value of 0.048. Citizens feel cheated if corruption is
widespread, their tax burden is not spent well, and that they are not protected by the
rules of law. Therefore, the government should work a lot to combat corruption and
balance government service and the paid tax.

Keywords

Tax morale, Corruption

References

• fourth columns, there are associated standard errors and z-statistics for each variable
• respectively. The statistical significances of the variables are determined by using the z-statistics.
• It needs the marginal effects to interpret the results of ordered probit effectively. The marginal
• effects show how the probabilities of each outcome change with respect to changes in regressors.
• It shows the change in probability when the predictor or independent variable increases by one
• unit. Therefore, the marginal effects are calculated in table 4.2.1 in different outcomes.
• Moreover, the prob > chi2 are given at the upper section of the coefficient shows that the model
• is statistically significant since the probability value of chi-square is much less than 0.01.
• The findings indicate that there is a significant negative correlation between corruption
• and tax morale. An increase in the corruption scale by one point decreases the share of subjects
• indicating the lowest tax morale by more than -.0253779 percentage points. This result is
• consistent with Fjeldstad (2005) argument’ that the presence of corruption undermines tax
• morale of the citizens who become frustrated and undermines confidence in the tax system,
• affects willingness to pay taxes, and reduces a country’s capacity to finance government expenditures.
• 3 Hypotheses Testing
• No statistically significant relationships exist between corruption and tax morale.
• As can be seen from table 4.2.2 above, there is a significant relationship between corruption and
• tax morale at a p value of 0.048. By this result, we reject the null hypothesis and accept the
• alternate. In other words, we accept that there is a statically significant relationship between
• corruption and tax morale.
• CONCLUSION AND RECOMMENDATION
• The findings show that there is a significant negative correlation between corruption and tax
• morale. The majority of the respondent believes that as most public officials are engage in
• corruption and bribe taking. Citizens feel cheated if corruption is widespread, their tax burden is
• not spent well, and that they are not protected by the rules of law. Therefore, the government
• should work a lot to combat corruption and balance government service and the paid tax.
• Taxpayers are more inclined to comply with the laws if the relation between the paid tax and the
• performed government services is found to be equitable.
• Aguilera, R. and A. Vadera( 2008). ‘The Dark Side of Authority: Antecedents, Mechanisms, and Outcomes of Organizational Corruption’, Journal of Business Ethics , 77 (4), pp. 431- 449.
• Bird, R.M. and Zolt, E. (2003).Introduction to Tax Policy Design and Development. Notes for a course on Practical Issues of Tax Policy in Developing Bank(see Countries,World
• www1.worldbank.org/.../WBI%20Module%201(Bird&Zolt)April10.doc.)
• Campos, J. E., D. Lien and S. Pradhan (1999), “The Impact of Corruption on Investment: Predictability Matters”, World Development , 27 (6), pp. 1059-1067.
• Cummings, Ronald G., Jorge Martinez-Vazquez, Michael McKee, and Benno Torgler. (2005). “Effects of Tax Morale on Tax Compliance: Experimental and Survey Evidence” Working Basel.
• Erard, B. and J. S. Feinstein (1994),“The Role of Moral Sentiments and Audit Perceptions in Tax Compliance”, Public Finance, 49, pp.70-89.
• Fjeldstad, O-H. (2005). “Corruption in Tax Administration: Lessons from Institutional Reforms in Uganda”, WP 2005:10, CMI Working Paper, Bergen.
• Frey and Torgler (2004) “Taxation and Conditional Cooperation”, Institut d'Economia de Barcelona, University of Barcelona.
• Hall, R. E. and C. I. Jones ( 1999) “Why Do Some Countries Produce so Much More Output per Worker than Others?”, The Quarterly Journal of Economics , pp. 83-116.
• Levin, M. and Satarov, G. (2000). ‘Corruption and Institutions in Russia’, European Journal of Political Economy, 16, pp.113-132.
• Luigi Alberto Franzoni (2008) “Tax Compliance”, Encyclopedia of Law and Economics , University of Bologna, Italy, pp 21.
• Mauro, P.(1995) “Corruption and Growth”, The Quarterly Journal of Economics , 110 (3).pp 681-712.
• Picur, R. and A. Riahi-Belkaoui( 2006) “The Impact of Bureaucracy, Corruption and Tax Compliance”, Review of Accounting and Finance, Vol. 5 No. 2, pp.174-180.
• Rose-Ackerman, S. (1997). The Political Economy of Corruption’, in Elliott, K. A. (ed.), Corruption and the Global Economy, Washington DC: Institute for International Economics, pp. 31-66.
• Shleifer, A. and R. Vishny (1993), “Corruption”, The Quarterly Journal of Economics , 108 (3), pp. 599-617.
• Torgler B. and Schaffner (2007), Causes and Consequences of Tax Morale: An Empirical Investigation, Working Paper No. 2007
• Torgler, B. (2001). Is Tax Evasion Never Justifiable?, Journal of Public Finance and Public Choice. XIX: 143.
• Transparency International(2009). Global Corruption Report (Cambridge University Press).
• Transparency International(2011). Global Corruption Report.
• Wang, L. (2010). A Review of the Determinants of Voluntary Compliance with Tax Laws by South African Taxpayers with Particular Reference to Businesses in South Africa. Unpublished MPhil: Taxation mini-dissertation, University of Pretoria.
• Yamane, Yaro (1964). Statistics: An Introductory Analysis, New York: Hamper.