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Tax Morale and International Tax Evasion |
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| Institution: | 1. Department of Economics, Fogelman College of Business and Economics, University of Memphis, Memphis, TN, USA;2. Department of Accounting and Finance, Gerald Schwartz School of Business, St. Francis Xavier University, Antigonish, Nova Scotia, Canada;3. Department of Accounting, Information Systems, and Finance, School of Business, Emporia State University, Emporia, KS, USA |
| Abstract: | Low tax morale is associated with domestic tax evasion. We find evidence of cross-border equity flows designed to evade taxes in low tax morale countries. Using Foreign Portfolio Equity Investment (FPI) flows into 21 OECD countries from 138 source countries and an index of tax morale from the World Value Survey (WVS), we show that individuals in countries with low tax morale engage in tax evasion via roundtripping through tax havens. This allows them to benefit from differential taxes applied to foreign investors vis-a-vis domestic investors. Our results remain robust to various measures of tax morale and distinct subsamples. |
| Keywords: | Tax morale Foreign portfolio investments Roundtripping Tax havens Tax evasion |
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