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The Impact of Corruption on Firm Tax Compliance in Transition Economies: Whom Do You Trust?

The Impact of Corruption on Firm Tax Compliance in Transition Economies: Whom Do You Trust? Tax compliance is an important issue for governments and the public alike. To meet public needs and fund public mandates, firms around the world are expected to comply with tax laws. Factors that are related to organizational (firm) tax compliance have not been sufficiently examined in the literature. Owing to the increasing global influence of transition economies, factors associated with firm tax compliance in transition economies are particularly of interest. Based on a sample of over 5,000 firms from 22 former Soviet Bloc transition economies, we find that higher levels of corruption and higher levels of particularized trust (reliance on friends and family) are associated with lower levels of tax compliance. Interestingly, we also find that the negative relationship between corruption and tax compliance is weakened in situations of higher generalized trust (trust in strangers). Overall, our study’s results suggest that institutional factors play an important role and are related to firm tax compliance behavior in transition economies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Ethics Springer Journals

The Impact of Corruption on Firm Tax Compliance in Transition Economies: Whom Do You Trust?

Journal of Business Ethics , Volume 116 (3) – Sep 12, 2012

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References (96)

Publisher
Springer Journals
Copyright
Copyright © 2012 by Springer Science+Business Media B.V.
Subject
Philosophy; Ethics; Economic Growth; Management/Business for Professionals; Quality of Life Research
ISSN
0167-4544
eISSN
1573-0697
DOI
10.1007/s10551-012-1457-5
Publisher site
See Article on Publisher Site

Abstract

Tax compliance is an important issue for governments and the public alike. To meet public needs and fund public mandates, firms around the world are expected to comply with tax laws. Factors that are related to organizational (firm) tax compliance have not been sufficiently examined in the literature. Owing to the increasing global influence of transition economies, factors associated with firm tax compliance in transition economies are particularly of interest. Based on a sample of over 5,000 firms from 22 former Soviet Bloc transition economies, we find that higher levels of corruption and higher levels of particularized trust (reliance on friends and family) are associated with lower levels of tax compliance. Interestingly, we also find that the negative relationship between corruption and tax compliance is weakened in situations of higher generalized trust (trust in strangers). Overall, our study’s results suggest that institutional factors play an important role and are related to firm tax compliance behavior in transition economies.

Journal

Journal of Business EthicsSpringer Journals

Published: Sep 12, 2012

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