Education and tax morale

Abstract

While the determinants of tax morale have been widely studied in the literature, surprisingly, the fundamental influence of education on tax morale has yet to be investigated. Given the insights in the psychological and political science literature about the role of education in the formation of social values, in this paper, we analyze two channels through which education shapes tax morale. We find that while the tax morale of individuals that are net receivers of welfare state benefits increases with their educational level, it decreases with educational level among those who are net contributors. Furthermore, our results indicate that the more highly educated, who have been shown to be better able to assess information in the media on public affairs, exhibit higher levels of tax morale in countries that have better quality public services, a fairer tax system and more transparent institutions. JEL classification: H26; H52; I25 Key words: Tax morale; Tax compliance; Education; Welfare state benefits; Trust in public institutions