The Ethics of Tax Evasion

In 1944, Martin Crowe, a Catholic priest, wrote a doctoral dissertation titled

The Moral Obligation of Paying Just Taxes

. His dissertation summarized and analyzed 500 years of theological and philosophical debate on this topic, much of which took place in Latin. Since Crowe’s dissertation, not much has been written on the topic of tax evasion from an ethical perspective, with a few exceptions. In 1998 and 1999, a few articles were published on the ethics of tax evasion in the

Journal of Accounting, Ethics and Public Policy

. An edited book on this topic was published in 1998. This chapter summarizes, updates, and expands on Crowe’s work and the other more recent work that has been published on this topic. Four basic views on the ethics of tax evasion have emerged over the centuries. This chapter presents and critiques those four views and raises some questions about points that have not yet been explored in the literature.

If we have a duty to pay taxes, to whom do we owe a duty? The literature over the last few thousand years has discussed three possibilities – to God, to some segment of the community, or to the state. The next few sections of this chapter review this literature and the various arguments that have been put forth that assert we have a duty to pay taxes.

Morality can exist only when there is choice. Stated alternatively, where there is no choice there is no morality. If a commanding officer orders a soldier to either kill someone or be killed for disobeying an order, the soldier is not morally responsible for executing the person who has been chosen for execution because he has no choice.

This chapter argues, given that taxation is a form of extortion, that taxation is ethically justified to resist it in a variety of ways (all the while keeping due process in mind). Prominent objections are considered and rejected; an alternative to funding legal services is suggested.

For centuries street markets have been vibrant multiuse spaces providing economic opportunities for immigrants and native populations alike. Only over the last 70–80 years have a number of laws – food safety, tax, and others – been adopted that criminalize street markets and vendors. Over the last 30 years we have witnessed some loosening of legal regimes to accommodate a number of public policy goals (such as access to healthy food) but tax law and policy have not kept pace with the emergent purposes associated with street markets and merchants. Thus, we need to know more about tax-related values and practices of vendors, the deeper aspirations and contextual sources of those values and practices, and how law and policy might be revised to enhance individual welfare and realize public goals.

The scholars who advocate secession on the ground that minorities are entitled to self-determination (i.e., a collective right to separate from a larger State) usually leave out further thought on the ethics of tax evasion (i.e., the individual right to evade taxation). The aim of this chapter is to fill this gap by showing that the ethics of secession and tax evasion might converge. If it is morally permissible for some minorities in a given territory to evade the rule and taxation of the State legislating in a given geographic area, and eventually to secede from the respective State, why should not this right apply to anyone, regardless his religion or ethnic background? Moreover, why should this right depend on such arbitrary criteria as religion or ethnicity, and not be extended to any individual in disagreement with the legislation of its State?

An 18-statement survey was constructed and distributed via the Internet to the ­members of the Association for Practical and Professional Ethics, the American Association of Philosophy Teachers, Philosophy in Europe, and PHILOSOP. A total of 39 responses were received.

The subject of Hindu ethics, and literature pertaining to it, stretches through 3,000 years of history and represents a vast array of research and analysis by both Indian and Western scholars. Yet, discerning a clear set of ethical principles based on definitional and methodological clarity remains elusive. This is not surprising because the study of ethics, related closely to Hindu philosophy, traces its origins back to the Vedic age, which over the centuries has spawned a plethora of scholars to offer views in their own understanding of Hindu ethics. Ancient literature on religion, philosophy, and ethics are numerous: Vedic ethics appears to be the original source; followed by the ethics of the Upanishads; then the Bhagavad Gita; the Dharma Shastras; the six orthodox systems of Indian philosophy, followed by the ethics of Jainism and Buddhism. In recent times philosophers such as Radhakrishnan, Mahatma Gandhi, Pandit Nehru, and Sri Aurobindo have all contributed to the vast body of knowledge on Hindu ethics.

This paper examines the traditional Jewish perspective to pay taxes. It uses sources from both the Talmud and traditional Jewish law to illuminate this topic. It explores reasons for paying taxes, such as the necessity for following a country’s laws, prohibition of lying, and the requirement to bring dignity to the Jewish people and to maintain individual integrity.

According to Islam, Muslims have a moral obligation to pay zakat for the support of the poor and for the legitimate functions of government. Thus, evading one’s duty to pay zakat is classified as an immoral act. The Islamic system of taxation is a voluntary one, at least partially, although Islamic literature makes it clear that a government is justified in forcing people to pay taxes if the amount raised by zakat is insufficient to cover all the legitimate costs of government. However, this right of interference with the individual’s personal property will be limited to the extent required by the general welfare of the society. Also, it does not follow that Muslims have a moral obligation to pay whatever taxes the government demands and it does not follow that any and all forms of taxation are legitimate. Thus, a case can be made that some forms of tax evasion, under certain conditions, may not be immoral. The author reviews the literature and discusses the circumstances where tax evasion would not be considered unethical under Islam.

Tax structures, tax systems, and tax policies are among the most important factors affecting economic and social affairs of any society. At the same time, the public’s reaction to them, specifi cally the public attitudes regarding tax evasion and tax avoidance, can substantially infl uence these systems and policies to the point of either facilitating and promoting or undermining and defeating their original purposes and intentions. In all societies, while tax avoidance is permitted, evasion of taxes is illegal. Tax evasion, however, is probably a practice as old as taxation itself (Adams, 1993 ). The relevant point, nonetheless, is when if ever, different people evade taxation and view their behavior to be ethically justifi ed. A correlated question is determination of the degree that culture or ideology infl uences attitudes toward tax evasion.

One hesitates to make general statements about “Christian” views on anything, given the fact that Christians of various sects have persecuted and even killed each other (not to mention Jews and Muslims) over the centuries because of doctrinal disputes. Nevertheless, I will attempt to make some general statements regarding Christian doctrine on the ethics of tax evasion. The literature on this topic is scant, or at least was scant until recently (McGee 1998 ). Therefore, I will necessarily be limited in my discussion to some Biblical passages, a few recent articles ( Pennock ; Schansberg ; Gronbacher ; Smith and Kimball ; McGee 1994a ) , the views of some Popes, and a doctoral dissertation that was written in the 1940s ( Crowe ).

Most studies that have been done on tax evasion take a public finance perspective. Very few studies look at tax evasion from the perspective of ethics, philosophy, or religion. However, there are some exceptions. A study by McGee (1994) took a philosophical approach. One of the most comprehensive analyses of tax evasion from an ethical and religious perspective was a doctoral thesis written by Martin Crowe in 1944. The

Journal of Accounting, Ethics & Public Policy

published a series of articles on tax evasion from various religious, secular, and philosophical perspectives in 1998 and 1999. Most of those articles were also published in an edited book (McGee 1998a). Since the publication of that book, a few other articles have addressed the issue of tax evasion from an ethical perspective.

A number of explanations are commonly presented in public finance texts as reasons why government intervention in the economy will improve performance. This chapter questions the validity of each of them. The chapter examines the merit goods argument, equity considerations, growth and development, and stabilization, and finds the arguments offered in their behalf to be unpersuasive. Public finance as presented in textbooks is seen as relying on rather dubious normative arguments.

People have been evading taxes ever since the first ruler attempted to tax his subjects (Adams, 1982, 1993; Webber & Wildavsky, 1986). There have been tax revolts (Baldwin, 1967; Beito, 1989) and talk of tax revolts (Laffer & Seymour, 1979; Larson, 1973; Rabushka & Ryan, 1982). There have been discussions of tax fairness (Boortz & Linder, 2005; Graetz & Shapiro, 2005; McCaffery, 2002) and reform (Champagne, 1994; DioGuardi, 1992; Grace, 1984; Payne, 1993; Schlaes, 1999; Shughart, 1997) and criticisms of the graduated income tax (Blum & Kalven, 1953) and of government abuses (Burnham, 1989; Frankel & Fink, 1985; Gross, 1995; Hansen, 1984).

People mostly pay their taxes although there is a low probability of getting caught and being penalized. Thus, new attempts in the tax compliance literature try to go beyond standard economic theory. This chapter examines citizens’ attitudes toward paying taxes – what is sometimes termed their “tax morale,” or the intrinsic motivation to pay taxes. Tax morale may be a key determinant to explain why people are honest. However, there are not many papers that explore the concept of tax morale theoretically and empirically. This study, based on the World Values Survey, therefore attempts to fill this gap in the literature, focusing on tax morale in the USA. Societal variables, such as trust or pride, have been identified as key determinants that shape tax morale in the USA. The results also show an increase of tax morale between 1982 and 1995.

Most studies of tax evasion take an economic or public finance perspective. Not much has been written from a philosophical or ethical viewpoint. That is probably because most economists are utilitarians and most lawyers are legalists. However, there is a small body of literature that addresses tax evasion issues from a philosophical or theological perspective. The present study is intended to add to that small body of literature while forming a bridge to the public finance literature as well.

Most studies of tax evasion take an economic or public finance perspective. Not much has been written from a philosophical or ethical viewpoint. That is probably because most economists are utilitarians and most lawyers are legalists. However, there is a small body of literature that addresses tax evasion issues from a philosophical or theological perspective. The present study is intended to add to that small body of literature while forming a bridge to the public finance literature as well.

The vast majority of articles that have been written about tax evasion have been written from the perspective of public finance. They discuss technical aspects of tax evasion and the primary and secondary effects that tax evasion has on an economy. In many cases, there is also a discussion about how to prevent or minimize tax evasion. Very few articles discuss ethical aspects of tax evasion. Thus, there is a need for further research, which the present study is intended to partially address.

Most studies of tax evasion take an economic or public finance perspective. Not much has been written from a philosophical or ethical viewpoint. That is probably because most economists are utilitarians and most lawyers are legalists. However, there is a small body of literature that addresses tax evasion issues from a philosophical or theological perspective. The present study is intended to add to that small body of literature while forming a bridge to the public finance literature as well.

The vast majority of articles that have been written about tax evasion have been written from the perspective of public finance. They discuss technical aspects of tax evasion and the primary and secondary effects that tax evasion has on an economy. In many cases, there is also a discussion about how to prevent or minimize tax evasion. Very few articles discuss ethical aspects of tax evasion. Thus, there is a need for further research which the present study is intended to partially address.

Several studies on the ethics of tax evasion have been conducted in recent years. Some of them have been theoretical while others have been empirical. The present study is mostly empirical, although some theory is also discussed.

Ever since taxes were created they were combined with tax avoidance and tax evasion. Taxpayers are wandering between the legal and the illegal side for lowering their tax liabilities and for maximizing their after tax income. Every country around the world has its own experience in fighting with these practices and trying to limit their negative effect.

This chapter deals with some of the Bulgarian characteristics of tax evasion, looks into the genesis of the problem, and shows that there is no single definition of the problem and that it cannot be solved without political will.

Several studies on the ethics of tax evasion have been conducted in recent years. Some of them have been theoretical while others have been empirical. The present study is mostly empirical, although some theory is also discussed.

The goal of this study is to determine the relative seriousness of tax evasion compared to other crimes or acts that are considered to be unethical. A few other studies have examined this issue and have used methodologies similar to the one used in the present study. Karlinsky, Burton and Blanthorne (2004) measured the perceptions of students in North Carolina and California as to the seriousness of tax evasion and found that it ranked 11th out of 21 offenses. Burton, Karlinsky and Blanthorne (2005) surveyed MBA and graduate tax students from California and North Carolina as well as a few tax professors from across the USA using the same methodology and list of crimes and found the same result with regard to tax evasion; it ranked 11th out of 21 crimes. Gupta (2007) replicated the 2004 study using a New Zealand student population and found that tax evasion ranked 12th out of 21 crimes.

Gender is perhaps the most widely studied demographic variable. It is an interesting variable from the perspectives of economics, law, philosophy, political science, psychology, sociology, anthropology, religion, history, and culture, to name a few. What makes women different from men? How are they different from men? Is female thinking becoming closer to male thinking as women gain equal rights and liberation?

Some studies have found that people become more respectful of authority and the rule of law as they get older. However, other studies have had contrary findings. The next few pages analyze the relationship between age and attitudes toward the ethics of tax evasion, using the World Values survey data.

Some studies have found that the more education a person has, the more averse they are to tax evasion, while other studies have found just the opposite. Part of the reason for the differing results is because several behavioral factors are at work that pull taxpayers’ opinions in opposite directions. Richer taxpayers tend to be more educated than the general population, and they may have a tendency to have more respect for the rule of law. On the other hand, rich people are taxed more than poor people and they may resent paying so much in taxes, causing them to view tax evasion more favorably.

One might assume that the more religious a person is, the more likely he/she is to pay taxes, but such an assumption must be tested. The purpose of this chapter is to do that. Religiosity may be estimated by the frequency with which someone attends religious services. The World Values surveys collected data on this variable. The results are reported below.

Religion is another variable that has an influence on ethical beliefs and attitude toward paying taxes. The World Values surveys collected data on this variable. The results are reported below.

Marital status is another variable that has an influence on ethical beliefs and attitude toward paying taxes. The World Values surveys collected data on this variable. It was thought that marital status might have some effect on attitudes toward tax evasion but the effect it has is unclear. One might assume a priori that married people are more responsible than single people and thus would be more averse to tax evasion. On the other hand, married people might have more expenses than younger people and might have less ability to pay taxes, which could have just the opposite effect on their opinion on the issue of tax evasion. Thus, it is necessary to test the a priori assumptions. The results are reported below.

Income was another variable tracked in the World Values surveys. One might assume a priori that the more income one has, the less aversion there will be to tax evasion because of the feeling by the relatively rich that they are being overtaxed and exploited. On the other hand, those in the poorer income groups might have less aversion to tax evasion because of their inability to pay. Thus, there is a need to conduct a test to learn what the relationship is between income level and attitude toward tax evasion.

The studies summarized below were based on survey research conducted by Robert W. McGee, sometimes with coauthors. The studies usually consisted of 18 statements beginning with the phrase, “Tax evasion is ethical if ….” The first 15 statements are based on arguments used in prior studies over the last 500 years to justify tax evasion. The last three statements were added to survey views on three human rights issues that had not been addressed in prior research.

The Human Beliefs and Values Surveys have been collecting opinion and demographic data on countries all over the world since the early 1980s. Some surveys collected responses to hundreds of questions from 200,000 people in more than 80 countries representing 85% of the world’s population. The samples for each country were generally large, in some cases exceeding 2,000 participants. The surveys generally used a 10-point Likert Scale where 1 = never justified and 10 = always justified. The studies listed below used the data from these surveys.

McGee, Robert W. Serkan Benk, Adriana M. Ross & Harun Kılıçaslan (2009). An Empirical Study of Ethical Opinion in Germany.

Journal of Accounting, Ethics & Public Policy

, 10(2), 243–259.